Everyone seems to be on the hunt for that elusive path to financial freedom. And the general consensus seems to be that if you want to grow your wealth and retire early, the employment route will not get you there on time.
That leaves investing.
Be Your Own Boss
Real estate investing has been around since time immemorial and is a tried and true method to financial independence. Whether via fixing and flipping houses, wholesaling, or owning rental properties (commercial or residential), real estate provides many avenues to join in on the fun.
This goes for the stock market, too. A widely established investment method where fortunes have been made, the stock market is often pitted against real estate with regard to which makes for a better investment. Opinion on this remains divided as cleanly as when Ernest Rutherford split the atom in 1917.
More recently, another form of investment has entered the big debate: network marketing, i.e. multi-level marketing (MLM).
This has grown into one of the most popular sources of regular income streams outside of employment, and it has attracted its fair share of loyal followers—in a way, more loyal zealous than the other investments attract.
Related: 3 Reasons This is the Beginning of the End of Real Estate as We Know it
Unlike real estate (or stock market) investing, where you can be a “solopreneur,” network marketing involves relying on a team to grow your business. For most, the objective is to become a team leader (district manager of your area, for example) because this means the opportunity to earn more money.
Obviously, a fatter paycheck is a priority for most people. But one notable downside about network marketing that you won’t encounter in real estate is that while you may own your own boss, you still operate under the confines of the parent company. You have a say in neither the product line nor the prices themselves.
Unlimited Returns?
MLM is founded on the premise of the higher up the ladder you go, the more money you will earn; and there are no limits. In fact, subscribers of this business model often tout it to be a better investment option than real estate, stocks, mutual funds, etc. because there are no limits to the money you could make.
MLMers have often been accused of being too positive to the point of delusion. While that claim may be a little over the top, if network marketing was such a great business model, then we would all be doing it, right? The problem is compounded the more seeing how network marketing is often marketed as snake oil. Recruits are promised a lot of money—with little work.
It comes as no surprise then to hear many people becoming disenchanted with MLM barely after getting recruited. Of course, there are things you could do to make money without working around the clock. But name me one where it’s possible for everyone who starts their business to make crazy sums without putting in a shift, and I’ll trade my house for it.
The point is, making good money takes hard work. At least in real estate, there is no sugarcoating this fact. Cash won’t fall from the sky for you as a real estate investor; hard work breeds success in this industry, as in any other, and every successful investor will tell you this. But on the flip side, there is no cap to what you could earn. The sky may not rain green notes, but it is the limit.
When it comes to MLM, it is wise to read the fine copy before you join a network marketing company to check for any red flags, especially around the earnings aspect. Multi-level marketing is often marketed as a low-cost business model, but this is only because they don’t mention the marketing and recruiting costs, which are entirely on you.
Chart Your Own Future
The one area network marketing clearly compares to real estate is in the “go-getter” mindset. Given you are technically your own boss, you need to go out there and make it happen by yourself.
There are no guarantees in either industry—at least in the initial stages of growing your business.
MLM also has a certain kind of stigma associated with it due to issues of scamming and the whole pyramid scheme-type business model—which is understandable. These are businesses that are feverishly determined to project the high income figures you stand to shovel in. “Hype” is the word for this, I believe.
You see, network marketing is more about recruiting product distributors (to grow the network) as opposed to customers. Oarket. And even if there is a long list of products to market, if everyone is a distributor, whom are you going to sell to?
I’ve heard a lot of inspiring stories in my life, but this is not what constitutes a thriving business.
What this all boils down to is that unlike real estate, which is an established “traditional” industry, network marketing requires you to work hard when marketing yourself to potential recruits and customers.
Related: 7 Daily Habits of Real Estate Investors Who Seek Financial Freedom
Branding
Real estate provides investors with an opportunity to build successful companies from scratch. What is also true is that network marketing has its own share of superstars, but these guys are only hotshots within their respective organizations.
A good number have no idea on how to extend their brand beyond the company. And even if they did, there is always the small issue of stigma towards MLM to contend with.
Look, I have no issue with network marketing as an alternative source of income. If it sounds like your kind of thing, whatever floats your boat.
However, it might be good to temper down your expectations until you get a solid grasp of the industry. Forget about the rose petals and fairy dust tales you will mostly likely hear if you decide to venture into network marketing. Chances are, you will become disillusioned when you find out it is no easy going.
Neither real estate nor MLM is a cakewalk. Be prepared to set some considerable amount of time learning the industry ins and outs, as this is the only way you can increase your chances of succeeding in either.
Have you ever tried your hand at network marketing? What are your thoughts on this strategy?
Leave a comment below!
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
