There are dozens of formulas that real estate investors use every day to analyze their deals, such as cash on cash return, or cap rates, but none are as important or compelling as Napoleon Hill’s formula:
Let me define each variable for you and discuss why I believe this formula will lead you to success and fulfillment in your life.
Q1 stands for the quality of service rendered. Q2 stands for the quantity. MA is your mental attitude and C equals your compensation. This formula can be applied to all businesses, but I want to focus on real estate investors, specifically Buy and Hold investors.
To sustain a thriving business, an investor’s livelihood is dependent on delivering a quality product, whether it pertains to a clean, affordable apartment or a home that has been rehabbed and ready to sell. If the investor’s apartments are outdated or overpriced, the weakness will be reflected in the price of the rent. The asset can also demonstrate other weaknesses, such as deferred maintenance or poor customer service. Likewise, a property that has undergone a mediocre renovation will yield a lower sales price.
Quantity is simply the amount of a product that the investor or businessperson can offer. This is where most investors fail to create wealth or generate substantial passive income. Simply put, the more apartments or units an investor owns and rents out, the wealthier he will become. Similarly, the more homes an investor can fix and flip, the more income he will create.
MA stands for mental attitude. A businessperson’s attitude affects the entire business, and if you see yourself burned out dealing with tenants or renovating properties, then it is time to step back and evaluate your current situation. One of my favorite quotes is “The work we do is a reflection of who we are.” One who possesses a positive mental attitude will be able to overcome those bumps in the road and continue onward to their goals.
If you add all three of these variables together, the result is your Compensation, everything that comes into your life. Compensation encompasses such things as money, joy, harmony, fulfillment and other negative emptions that you may attract.
The best way to sum up this powerful formula is “Whatever you put into life is what you get.” Every successful individual in life knows that they are the ones in control of their own destiny. Sometimes, we have to step back and try to work smarter, and not always harder. Offer a quality product to as many customers you can reach in a positive, empowering attitude and you will achieve the compensation you deserve.
Please leave a comment and let me know if you are utilizing this formula in your business.