This week’s Steve-ism is:

“Buy problems; sell solutions.”

There are two types of property profits – generic and manufactured.

A generic profit is one made by the market, such as when all the properties in a suburb appreciate in value.

A manufactured profit is made by the investor when they apply their skill and expertise to convert a problem into a solution.

Watch an excellent video illustrating the differences between generic and manufactured profits below:

 

 

Consider an off-the-plan apartment. The developer took a problem (a vacant block, or an under-utilised property) and solved it by converting it into modern accommodation. Provided the purchaser is willing to pay more than the developer’s costs, then the developer will have manufactured a profit.

On the other hand, the investor buying the unit is purchasing a solution (i.e. no more value can be added), thus the only way they can profit is by generic gains.

How much of your property profit is made from your skill and expertise? How much is made by the market?

Astute investors don’t make generic or manufactured gains, they make generic and manufactured gains. They do this by purchasing problem properties, solving the problems to add value, and doing it in a market that is also appreciating in value.

The smartest and most profitable investors I know focus on niche problems – ones they can find and fix better than most others. If you can do the same, then you’ll have a money machine that you can turn on at will.

The “Buy problems; sell solutions” mantra testifies that really impressive property profits are made by value adding, not buying, holding and hoping.

What type of investor are you – a deal maker or a deal taker?

If you have a question, comment or query then post it below. Alternatively, browse what others are saying.

Until next time, remember that success comes from doing things differently.

– Steve McKnight

Comments

  1. Margaret

    Hi Steve
    Attended your conference in Sydney and heard your plea for comments. So here I’m commenting. After your presentation we are very confident to begin our property investing program. Agree with the buy a problem and sell a solution. I work in sales and that’s our mantra, identify the problem and sell the product that will solve the problem so it’s a concept that I grasp.
    What I liked the most was the concept of identifying the niche to maximize profits. It made absolute sense and I think we have a skill that could fill a niche.
    Thanks again for a great day..also we loved the Steps and as a family we will be investing in the online version.
    Naturally we are busy sorting out our WAP…
    Cheers

  3. Profile photo of I Love Tax

    This post is for you Steve. You mentioned at the conference on the weekend that you don’t get enough comments. Haha. But if we’re being honest, please keep up these weekly posts. I look forward to them in my inbox. It helps me keep my motivation up.

  4. Profile photo of Dwight

    I also love to buy problems to live in. It’s a built in discount and when I fix it up and move on there’s no tax to pay! Nothing better than going to an open that looks like a “crime scene”…

  11. Gladys Gomez

    I cant resist to post this time……

    It was great to be at the Conference and see Steve again in Sydney.

    2 of the workshops available was about my strategy, so I attend them. It was really good to be there listening to successful people.

    This post is perfect for me as a reminder that achieving good deals for a profit is possible,

    At the moment I am looking for a profitable deal to do it with a JV As I am a deal maker.

    Thanks again Steve for bringing great speakers with good information and to make all this available and for future generations too. We all have to appreciate all is available.

      • June

        Hi Steve,

        I am currently under contract to purchase a house that is old and needs repair/updating, which I will then hold and rent out (it’s in a great location). But, it’s not a rundown uninhabitable house, and there is currently a tenant who would like to renew her lease (great tenant according to property managers and happy to pay my requested rental amount). Conveniently the tenant’s lease ends on the day that I take over the title.

        I do want to increase the value of this house.

        So my question is… should I not renew her lease, renovate the house, and then find another tenant? Or should I renew her lease and do house renovations in stages to work around the tenant? Or is it even worth doing any renovations if the tenant is quite happy to live there as it is and just repair the issues that need repairing?

        I hope the scenario makes sense :)

        Thanks Steve!

Got something to say? Post a comment...