By Minh Pham, Mentor/Investor/Author, www.GuaranteeProfits.com
Manage Cashflow
Undercapitalization Brings About Ultimate Business Failure:
Inadequate start-up funding leads to many small real estate investing business failures. Having too little money as your real estate investing business struggles to get off the ground can quickly lead to disaster. Many real estate investing business owners overlook the time gap separating the ribbon-cutting ceremony from the first quarterly flow of profits. Having only enough cash on hand for a few months rent and marketing costs will leave you vulnerable to unforeseen difficulties. It would also be a smart move to get investors (friends, family members, and others you might know) who would like to invest in your business for marketing and start up costs. Good friends will certainly invest in you, if you are confident, focused and have a detailed ROI-yield business plan to succeed.
Although, getting into debt is your own choice, I may not recommend this to all real estate investors getting started who lack funds, but pulling money out of your home (i.e., home equity line of credit, if you have any) is another good way to invest into your own business. I have known several investors who have planned properly, using this strategy to ‘tough out’ their early start-up months/year with very nice ROI-yield and profitability.
Last, the “plastic” we all have access to is the most common way a lot of investors do it, but be careful with these bank-credit cards because interest rates on these babies can be fairly high (depending upon your credit status and standing) and some cards don’t have a big enough limit to readily fund your business needs in the first few months to a year.
Operating a real estate investing business would be considerably easier if enthusiasm, hard work and dedication were the sole requirements for success. But the fate of every enterprise ultimately depends on the numbers. An accurate, easily understood and timely accounting system therefore is an absolute must. Otherwise, accurate records will be impossible to keep – one of the worst mistakes a small real estate investing business owner can make.
Managing Your Time
Focus On The Right Priorities. One of the universal challenges for investors is managing the competing demands on your time. One common time trap is focusing on the things you’d like to do and procrastinating about the activities that may be essential to your success but aren’t in your comfort zone.
“Time-Block” Your Way for Enhanced Time Efficiency. One of the easiest and most effective ways of ensuring the proper use of your time is to block out each week’s calendar to concentrate on critical activities.
Start with the list of your essential tasks which you plan each week. Be sure that you schedule the time for all of the vital tasks – those you don’t enjoy as well as those you like doing – before turning to the enjoyable activities.
By blocking out time this way, you can impose that extra bit of discipline needed to increase the likelihood that essential activities take place. For example, you could set aside 10 to 11 a.m. each morning to call clients and 11 to 12 p.m. to contact prospects. Or you could reserve lunch every Friday to meet with a key referral source.
Organizing a Dream Team
Develop a Proactive & Organized Business Style
Another leading cause of small real estate investing business failure is poor management. The small real estate investing business owner must also be capable of gathering and maintaining an effective team (good Attorneys, CPAs, Mortgage Brokers, Private Lenders, Contractors, Marketing Specialists, Realtors, Home Inspectors, etc).
To help assemble the right people for your team, take the time to completely spell out the talents, skills, abilities, energy-levels and passions:
1. Their experience and education levels;
2. Their roles best played in their respective organizations;
3. Their training, certifications and specialties;
4. How can they help you and vice versa.
Get Help!!
Pride Goes Before the Fall:
Most small real estate investing business owners take pride in their independence and problem-handling skills. But even the most skilled entrepreneur may need the assistance of a professional from time to time – often when it can least be afforded. Fortunately, however, professional advice need not be expensive. Real estate investing clubs and trade associations, chambers of commerce and the local library, just to name a few, are all strategic sources of modestly priced – or even free – expertise.
Don’t let a misplaced sense of pride prevent you from discovering the correct solutions to your real estate investing business problems.
Determine how much help you need and try to get it as early as possible.
A mentor is highly recommended since the majority of successful investors take on a mentor early in their real estate career to achieve success sooner and to avoid costly mistakes.
Key Factors: Momentum & Confidence
When doing a first deal as a beginning investor, the key factor is momentum and confidence. If you expect to hit a homerun on the first deal that will make you $100,000 net profit, you may be waiting a long time. Getting through deals that put money in your pocket then evaluating where you want to go from there is more important than getting rich from your first deal. In fact, this could be a pitfall, versus a windfall, if you were to hit a big deal on the get-go. Then you’d expect it to always be like this, and is isn’t, across the board of application and realization in real estate investing and deal transactions.
The key is to get started and “get going”, not to wait forever until that “giant deal of a lifetime” comes your way.
