Thread: Internet vs Real Estate

It seems that most of the people on this site are using the internet or real estate or a combination of both to reach their fastlane goals.

As someone who has worked in real estate for the past 6 years, I have a pretty decent grasp on the real estate business as a whole. I've been planning to use real estate to help me reach my business goals in life.

Until I found this site, I knew very little about the internet. The more I read about it, the more intrigued I am. For fastlane members starting from square one, the internet may offer them the medium to start generating capital which can be then leveraged into other vehicles.

I thought this may be a helpful thread to start for real estate newbies, internet newbies and newbies who are considering using both in their PLANS.

I've started a list with some general pluses and minuses (none of these are absolute). I'd LOVE for others to add!!

Real Estate

Pluses: (1) demographics favor long term demand for housing (for sale and rental units)
(2) tax benefits
(3) systematic ways to achieve long term cashflow
(4) a big deal can pay you millions in a few years time

Negatives: (1) For the most part, need cash to get started (not always true)
(2) Money is tied up in projects and must sell or refi to pull out
(3) High barrier to entry in big deals

Internet

Pluses: (1) low barrier to entry
(2) you can create a business around anything you want, as long as your entre. premise is thought out

Negatives: (1) lots of competition
(2) harder to understand than real estate

Thanks!!

PS. Those of you who have made their millions already, based on today's business climate and what you see happening in the future, if you had to start with NO MONEY FROM SQUARE ONE, would you ever consider using the other one? (i.e. MJ using real estate, SteveO or Russ using internet?)

Real Estate Pros:
- Can make money very quickly if you need to (wholesaling)

Internet Pros:
- Can go to work in your pajamas

Real Estate Positive:

"Tangible" Asset... for some 'concrete' type thinkers (like me) something you can see or drive by feels more real.

Leveraged

Real Estate Neg:

Not liquid
Geographic constraints
higher barrier of entry

Originally Posted by Sid23

Real Estate

Pluses: (1) demographics favor long term demand for housing (for sale and rental units)
(2) tax benefits
(3) systematic ways to achieve long term cashflow
(4) a big deal can pay you millions in a few years time

Negatives: (1) For the most part, need cash to get started (not always true)
(2) Money is tied up in projects and must sell or refi to pull out
(3) High barrier to entry in big deals

Internet

Pluses: (1) low barrier to entry
(2) you can create a business around anything you want, as long as your entre. premise is thought out

Negatives: (1) lots of competition
(2) harder to understand than real estate

Here's my .02:

Internet

Pluses (to just name a few):

- You can research your target market and find out exactly what they are buying, when they are buying it, how often they are buying it and how much they are will to pay for it.
- Tax benefits of a small business
- Systematic ways to achieve long term cashflow
- A big deal can pay you millions in a few years time
- Large amount of capital isn't necessary to start
- Leverage
- Risk v. reward can't be beat

As for the negatives, frankly I really don't see any at all. The negatives you see are only due to the fact that you are just learning about e-biz...they aren't real. ...I could show you in a couple of hours how to assess your competition and really how to get started in dominating your target market. ...Another benefit to e-biz is that the learning curve doesn't cost you tens of thousands of dollars, (like RE can) and since you can put up a site in a couple of hours, you can continually refine your process at break neck speed.

...I also started out in RE, and it is my first passion. Since I got turned onto e-biz, I haven't looked back. Spend about 3 days in the e-biz section and take notes- then start applying what you learn. It will blow your socks off!

You guys/gals make it extremely difficult to follow the one trick pony advice. Sheesh.

Makes me want to jump head first into internet, but I have to keep telling myself to focus, focus, focus.

Originally Posted by 8 SNAKE

I find it interesting that so many people tout the internet's low barriers to entry as an advantage. While I agree that it is, I also see this as a huge disadvantage. It seems to me (as someone who's not in e-biz) that just about any moderately successful idea is immediately copied a thousand times over. That's not to say that a person can't stand out from the crowd and succeed, but it sure makes things difficult. I'd love to hear feedback from those who are in the e-trenches every day.

This is actually true in most businesses - not specifically to the internet. For example, real estate investing in almost every are of the country is saturated with people wanting to get their share of the profits after having read all the promises of fortune from late-night "gurus" pitching about the current foreclosure dilemma. And even specific local markets have their own cycles they are going through routinely. The real question is HOW can you differentiate yourself from the crowd? Even in real estate investing there are 100's of specific niches to excel in: note buying/selling, residential (wholesaling, landlording - even then what specific types, like L/O, owner financing, carrying a 2nd note, etc), commercial investing, and so on.

Originally Posted by 8 SNAKE

I find it interesting that so many people tout the internet's low barriers to entry as an advantage. While I agree that it is, I also see this as a huge disadvantage. It seems to me (as someone who's not in e-biz) that just about any moderately successful idea is immediately copied a thousand times over. That's not to say that a person can't stand out from the crowd and succeed, but it sure makes things difficult. I'd love to hear feedback from those who are in the e-trenches every day.

Execution. Execution. Execution.

I still keep close tabs on my old company and have been approached to re-invest now that a new management team is in place. Because of this, I keep an eye on the industry. I still see new websites popping up that replicate (copy) what I did - these replications are so weak, they steal our testimonials, my copy (that I wrote) and even graphics.

Now these new companies (copies of my website and business model) appear frequently ... usually 1 or 2 a month. I have a long laundry list of them recorded in my brain and I frequently return to visit them to see if they ever made business traction. Rarely they do. Some disappear. Some stagnate. Most give up.

Yes, copies pop up. But from my experience, the daily execution and marketing (customer service, admin, etc.) typically follows into failure. If you analyzed my industry, you'd say "wow, it's crowded" but you'd also be fooled; most of the websites that have taken initative and copied me are either 1) DEAD or 2) DYING.

So it is true: There are low barriers and the minute you do anything that is novel or making money ... you will get copy-cats within weeks. Ultimately what thins the crowd is daily execution -- consistancy -- in marketing, admin, customer service. If you build a sailboat and drop it on the ocean with no captain, it won't go anywhere.


Again, execution -- not just in building the system, but marketing it, and running it.

Originally Posted by hatterasguy

Yeah but the difference between those guys and someone like well you and me is that we actualy get the good deals, and know what they look like. We have contacts that send us good deals, knock on doors, and when one comes along we can finance it quickly. We have lists of contractors to get things done cheaply and quickly, agents that we know move property, lawyers, bankers etc. Its not like building a website with clicks, these relationships grow over time, its not something you can walk into.

It's no different with Internet businesses...

The people who succeed over and over are the ones who have the experience, the know-how and especially the relationships. For example, if you and I were to have the same Internet business idea, I'd be a lot more likely to succeed because I have experience and contacts in the industry. I know high-profile bloggers who can help me market, venture capitalists to fund me, guys with PhDs in in comp sci to develop complex algorithms, patent attorneys to help protect my IP, etc.

But, that said, I'm actually not very well positioned to succeed compared to a lot of Internet entrepreneurs; if I had the same idea as a seasoned Internet entrepreneur, they'd crush me because they know *higher-profile* bloggers, *richer* VCs, *better* developers, *smarter* attorneys, etc.

So, just like real estate, there are degrees of experience and ability to leverage relationships, and those with more of both have a MUCH greater chance of success than the rest of us...

Originally Posted by bizboy

With the internet it's a trial and error, trail and error, trail and error, very hard to market the business and a great buzz is needed for your internet business. So many people start the same internet business, small percent succeed.

Yeah, but strangely enough, it seems to be the same small percent that tend to succeed repeatedly...probably just a coincidence though...

Originally Posted by bizboy

Real Estate is a proven system, as long you find the right deals and manage everything well.

I think the big difference is that a real estate investment tends to have a well-defined expected value with little variance, whereas an Internet investment tends to have a less-well-defined EV and higher variance.

Which one is likely to make more money is debatable, though it's clear that Internet investments should be viewed from a portfolio perspective, while RE investments should be analyzed on their individual merits.

I'm not really sure how or why you would try to compare them...it's like comparing a dollar bill to a share of stock currently with $1; neither is inherently better than the other, and depending on a lot of factors, that is likely to change.

The issue with low barrier to entry businesses
is many will start.
That doesn't mean many will continue.
Why?
Because continuing usually means work
and people are naturally lazy.

So you'll get constant churn.
How to compete with constant churn?
Develop a concept
that has returning customers.
One time customers don't care about churn.
Returning customers do.

Originally Posted by JScott

It's no different with Internet businesses...

The people who succeed over and over are the ones who have the experience, the know-how and especially the relationships. For example, if you and I were to have the same Internet business idea, I'd be a lot more likely to succeed because I have experience and contacts in the industry. I know high-profile bloggers who can help me market, venture capitalists to fund me, guys with PhDs in in comp sci to develop complex algorithms, patent attorneys to help protect my IP, etc.

But, that said, I'm actually not very well positioned to succeed compared to a lot of Internet entrepreneurs; if I had the same idea as a seasoned Internet entrepreneur, they'd crush me because they know *higher-profile* bloggers, *richer* VCs, *better* developers, *smarter* attorneys, etc.

So, just like real estate, there are degrees of experience and ability to leverage relationships, and those with more of both have a MUCH greater chance of success than the rest of us...

Great point JScott! rep speed ++

Peter2, rep speed ++ as well...great point. Do what you love and do best. Ignore the crowd.

I was the original poster of the question because I feel like many on this board are moving away from real estate and into ebiz and I was starting to think maybe I'm missing something obvious? Should I be starting an ebiz too? Am I missing the boat?

I had dinner with a friend last night who works on big real estate deals, his wife (a doctor), and 2 of his friends that were in town who work in Manhattan real estate. I was the only one at the table without a Harvard MBA (or med school degree). I was feeling a little intimidated and figured I wouldn't have much to add.

I was involved in the conversation and by the end, the other four people were asking me questions. I was "teaching" them what I knew. It was pretty amazing. His wife looked at me at one point and said, "Wow, I think you know more than these 3 guys combined!"

It really showed me that even though I'm not in the fastlane (yet), I'm positioning myself, meeting the right contacts (thru my J-O-B) and working for big time guys.

It was just a good reminder to stick with what you know. If I got into ebiz, I would be well behind the curve and start from scratch. Last night was a good reminder that I enjoy real estate and apparently know a lot about it!!

Time to re-read ONE TRICK PONY.