INVESTORS’ CORNER: The 80:20 principle :: Metrolina REIA

Wise use of your time is critical as an entrepreneur and investor. We all have more projects than we do time in the day.

But the traditional phrase “time management” never struck me as extremely helpful. Management to me means getting more efficient at organizing and dealing with the thousands of stimuli in your life.

Efficiency is nice when needed. But I also like the idea of elegant efficiency. Economy of effort. Purposefulness. Focus. Space. Creativity.

If you are frustrated because you are always busy and rarely get everything done, the solution is not just to become more efficient.  Efficiency is creating 500 filters and labels to process the 1,000 daily emails, 98 percent of which are not important.

Effectiveness, on the other hand, is only checking and responding to the emails that matter most and delaying or eliminating what matters least.

The 80:20 principle states that 80 percent of the wealth and income is produced and possessed by 20 percent of the population.  However, this ratio applies to other many other things.

With our rental properties I discovered, for example, that over 80 percent of the problems from our tenants were coming from less than 20 percent of our properties.  Guess which ones we decided to sell? Rent collecting has now become much less of a hassle.

With our real estate acquisitions, I discovered that we spent 80 percent of our time trying to buy short sales, yet they represented less than 20 percent of our revenue.  We eliminated that strategy and spent more time on more productive ones.  Our income increased as a result.

With my personal time in the business, I discovered that talking to qualified sellers was by far the most valuable, effective, money-earning use of my time.  I was good at it, and it was one of the hardest parts of the business for other people.  So I began measuring the success of my day by how many seller conversations I had. I also began creating systems to leverage my time, like lead generation from direct mail, ads, and other marketing.  The result was the purchase of many more deals than before.

With my personal life, I realized that a huge part of my long-term happiness was a result of time invested in certain activities, like exercise, reading for pleasure, and spending time with my wife and family. So I’ve gotten better at scheduling these activities first. I’ve also learned to eliminate less important activities like TV, useless meetings, and unimportant phone calls or emails.

If you do this 80:20 exercise, I promise you that you’ll find obvious improvements. And if you really follow through on the lessons you learn, you can transform the results in many areas of your life.

Lou Gimbutis is director of education at the Metrolina Real Estate Investors Association, which provides education, mentoring, and networking for real estate investing in the Charlotte region. He can be contacted at [email protected]. For more information, visit www.MetrolinaREIA.org.

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