This is episode number 2178. Jill and I are talking about, mostly me, probably this time. We’ll talk about real estate investment and survive AI, Artificial Intelligence. We just got off a call, Jill and I, our monthly call, as this is pure luck, where we spoke with all of the career path alumni that we’ve had since the beginning. When you join us for Career Path, it’s a mastermind series of education that Jill and I do once, sometimes twice a year, depending on the demand, that puts you into that group.

For the rest of Land Academy’s existence, once a month, we all get together and talk about stuff. This time, it happened to be AI-driven. It confirmed what I thought already, and I think everybody else on the call. We’ll talk about it here in a second. Each day on the show, we answer a question from our Atlanta Academy member Discord Forum. Take a deep dive into land-related topics by popular request.

Is Real Estate Investment Scalable? Debunking The Myth

Jason wrote, “After doing a lot of research, I don’t think real estate as a business is scalable. What do you all think about this topic? I’m trying to set myself not to work instead of run a large company.” I’m not sure what to say.

I’m trying to set myself up to not work in to not work at all instead of running a large company. Amen to that, sir.

True.

Aren’t we all. Is real estate scalable? No. Real estate investment is not scalable. It’s repeatable. Scalable became a popular word recently. There are certain products that are scalable. A perfect example is software. For lack of a complicated description in its simplest form, you write some software, you can sell it 30 times, or you can sell it 30 million times. 30 million is better than 30. It’s scalable.

With that, the customers are going to say, “We want improvements,” and then pretty soon, you’re releasing another product, and that business is very scalable. If you make toothpaste, if you make Crest toothpaste and you’ve branded yourselves since the Civil War with things like this, then you’re the next tube of toothpaste that gets sold. You have to make it and sell it. It’s repeatable. McDonald’s is repeatable. Manufacturing is totally repeatable. Online education, scalable.

I giggle too soon. They’re right.

Maybe you can never get to sooner. Wait, I can never giggle too soon.

I’m going to argue this. Wait a minute, let me tell you about scalable, not repeatable. Here’s what is scalable. I make a $10,000 profit. I make a $20,000 profit. I make a $40,000 profit. $80,000. Now I’m scaling. Do you know what I mean? I’m doing the same number of deals, but I’m making twice the profit on every deal. Now I’m scaling.

Economies Of Scale Vs. Repeatability: Decoding Real Estate Business Models

I think we’re splitting hairs. I would call that economies of scale. Put the word scales in it, so maybe it is scalable. I just think that’s efficiency what you’re talking about and repeatability. You’re still doing a bunch of deals. There’s still you’re still doing more work. Let’s think of it that way. You put all the work in upfront, writing some software, and you sold this is Microsoft Windows, let’s say whatever it’s called now.

You sell 3,000 packages of it, make some improvements. Not a lot. You sell 30,000, and that’s a hockey stick scalability. Same thing with like Harvard Business School online. 30,000 people are doing it once a semester, and then ten million are the next semester with the same content and not a lot of changes. In your example, I bought and sold a piece of real estate, then I used the money to buy and sell two pieces of real estate. You still have to do something every step of the way.

I want to say, one, I still do one real estate, but now I’ve doubled my profit on each one because I’m going for different properties.

I don’t want to split hairs with you, but I just think that’s economy is on a scale.

Mr. Accounting is using the fancy terms.

If you have a bar and you’re buying alcohol for the bar, and then you buy two more bars, and now it’s way cheaper to buy three times the alcohol in one swoop. That’s economies of scale. That’s not scaling.

Can we also use the cap rate from our vocabulary?

Here’s the point to this. This little thing that John is going through right here, these silly definitions that I obsess over, this stuff. I right from the beginning, anything that we do, go through all of this malarkey and just drudge through to set up something that I take to her and say, “I think we should do this.”

True.

Your reader should be doing this. You should design the company that checks all the boxes for you, not just whatever is your in front of you.

You should design the company that checks all the boxes for you, not just whatever's in front of you. Share on X

Is that why this topic is or this question is here? We haven’t even got to the topic yet. Is that why you put this in here? I’m curious.

What’s this question?

What emotion were you trying to evoke for me when you put this in here?

I’m trying to set myself up not to work at all. There are two ways you can do that. First is scalability. Find a business model that’s totally scalable. Number two.

Preferably not ours.

This is what Jill’s confusion is. I think maybe she just wants to argue.

No.

What Jill’s confusion is, we’re all leaving both ways. You not working at all. In one case, you’re scaled. In another case, you’ve built this point where there are a lot of people in place doing the repeatability for you. Another McDonald’s. Another deal versus a sales team selling the same software. You think I’m splitting hairs on this because I don’t.

No. You touched on something. No arguing is scalable and repeatable. I can get madder.

It’s escalatable and definitely repeatable.

Thanks for dropping that nugget in there.

Every once in a while, Jill says sentences like this. “No one could push my dad’s buttons like me.” Why would somebody say that to you? Why would the love of your life be traveling down this path together? Your kids are out of the house. They all have jobs. We don’t have a calendar because we have so much free time, and then she just says something like that.

It was obviously a good contact because we were talking about sixteen year old pain in the ass girls that’s why.

I think you were talking or thinking about that in your head because Jill and I have a whole conversation in her head, and she’ll just say the last sentence out loud to me.

I don’t know. Go ahead.

AI And The Future Of Real Estate: Will Investments Survive The Shift?

What is our topic? Will Real Estate Investment Survive AI?

Now we get to the good stuff, please.

Here’s what I think. This is what we were talking about on the call. No, we’ve talked about it a couple of days ago on the show here. Everything is it’s like catching a wave on a surfboard. You catch it right at the beginning, and it escalates and rises and rises. You hit the top. The wave starts to crest. You move in front of the wave on the surfboard, and you take it as long as you possibly can, you draw it, drag it all out.

It pushes you.

It pushes you at that point. You jump up before it smashes into the end. That’s exactly what real estate investment, or any type of investment, or your whole life should be like. It’s just timing. AI is that we’re still paddling around in the water, waiting for the right wave. We’re not even really on the surfboard yet. I know this because this is what happened with computers in general when I was very young.

My first computer was a card reader. We would write programs, and a card reader would calculate some outcome. That’s how old I am. Not bragging. When these PCs started coming out and you could buy them and put them on your desk at home or whatever, that was right where we are with AI. We’re still paddling. We don’t know what this is yet, but we know it’s going to be something amazing. AI is going to be a thousand times bigger than a PC on your desk. There’s still a PC on my desk three years from now.

AI is going to be a thousand times bigger than a PC on your desk. Share on X

If you want to crack yourself up, we did this on a call recently. Go out to Reddit and talk about business. Just type in what’s happening with AI or anything AI-driven and try to find an old string. What’s going to happen with AI? Try to find a 2 or 3-year-old string, and it’s a laugh crack up about what they think AI is going to be three years ago and two years ago. Nobody thought it would change software in any way. Nobody thought it would be anything. It was just really another search engine.

Is nice. You can go back and look at that stuff.

Now we know what’s going to happen. The point is we’re using it piece by piece now, and real estate investment and everything else as a tool in the toolbox to buy, do more deals, make stuff more efficient, answer our phones, or whatever else is happening. Someone’s going to listen to the show two years from now and they’ll say, “You guys had it wrong.” You cannot believe what’s going on with AI now. At some point, real estate is all about creating equity somehow.

There are a couple of ways you can create equity. What we do is we buy an asset undervalued and we resell it for more, hopefully quickly. We created some equity in the deal by negotiating a great purchase price and then executing the sale. Developers or the people on HGTV buy an asset, and they improve it. They may put a new kitchen in, or they buy a piece of land and build a skyscraper. The sum of all that, the cost of doing that, and the acquisition price is less than the exit amount, the sale amount.

The whole key in both of those is to keep your costs down, both on the acquisition side and the improvement side. AI can do that. AI can tell us at some point, who are the thirteen most likely people in Trenton, New Jersey, to sell their real estate? Is it to that point now? No. At some point, they’re going to do the deal for us. ChatGPT is a distraction. It is the first generation of AI that could write a biology paper for you, because it’s pulling information out of the internet and writing some biology.

You would have to go back then, edit it a little bit, make it your own, make it sound real. That’s just text. That’s just the beginning. No one even talks about the fact that AI will eventually be attached to mechanical devices. Ford’s developing a trailer hitch that will connect a boat, let’s call it just any trailer hitch that will connect to one of its vehicles, just with the press of a button, because it’s learning as it’s mechanically learning to.

It’s going to be cool.

The Real Impact Of AI On Real Estate

Real estate investment, as we know it, will not survive AI. We will have to take every step of the way on that surfboard, decide which tools and what their role is all the way up on the way, or it will decide for you. These are crazy times we live in. Did you just fog out there?

No, I was just thinking about ways I could use it. It’s coming. The things that you just said, like it’s good. I hate to use the word impersonate, but it can. I could see helping in, “They’re doing it now.” It’s already out there doing real estate deals as impersonating a person. I would like to use it to impersonate myself, to work on this health insurance thing I’m dealing with, just establishing a new company and a better plan. Seriously, call me when it’s done. Call me, ask me to tell me it’s done. Wouldn’t that be nice? I bet someone reading is going “You could do that, Jill.” I’m like, “I’m not ready.”

Somebody’s listening to this laughing house. You have no idea what’s capable.

It’s scary. Here’s one of the beautiful things I love about this is it’s for me. The last comment I’m going to make this week is this. I’ve only been with you in this world full-time for 16 years, 10 years Land Academy, and then six more years you and me. The changes that we’ve seen in that time, and how it just gets easier and faster and better and more fun. It frees me up. I can do more deals and things now because I don’t have to spend all day finding property.

It’s amazing how we did back then and how much money we still made, but we couldn’t find anything. It was shocking what we had to do back then. You started before Google. Not just Google Earth and Google Earth Pro. He started before Google. Think about that one. That was 30, going on 35 years ago for you. The change we made. Here we are talking about AI, and you’ve been in this full-time for 30 years. I’m sure we’re going to be fine, but I have learned you have to be open to this. You cannot say “I’m not doing it.”

You have to pay attention to it.

You need to embrace it. Get over it and embrace it, and then you’ll be okay.

Well said.

Thanks.

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