How do you make sure your business is in “the green?” I’m not talking about “going green” and being environmentally friendly. Your business needs to consider that, but what I am talking about is creating a real estate investing company that is sustainable for your long-term vision. In most recent years, real estate has been a good choice for almost everyone. College graduates and millennials have quit their jobs to flip homes or invest— raking in earnings in the range of six figures a year. Some have even surpassed that!
Ultimately though, it doesn’t matter if you are making $100 million each year if that cash flow cannot be sustained. The previous housing crisis taught many this lesson. The truth is that if your income and finances are not sustainable, your fall will be much harder. As more people evaluate real estate as an income earning source, how do you make sure you maintain even cash flow, develop continuity, and create sustainability for your business? The markets will go up and down, so how can you respond?
There are investors out there who believe that they need to quit their jobs to jump into the real estate industry. This is not true and often a very unnecessary act! There are other real estate investors who create large portfolios throughout the years while hanging onto their full-time job. This is a constant and helpful in economic downturns. Find a mentor who has built their business while keeping a 9-to-5. Learn something from them (but remember to always return value in some way in exchange for their knowledge).
There are ways that you can increase your confidence in remaining profitable in all types of markets. Take the following points into consideration.
Make It Through Any Market
The most important thing is that your income always exceed your expenses. Keep that cash flow line in the green. Stay positive! The point where your cash flow exceeds your expenses gets you that much closer to financial freedom. When you do reach financial freedom, hang on to it.
The point is to stay ahead of the game no matter what the market is doing. Remain hopeful for the future by believing that the best will happen, but always prepare for the worst case scenario. For a real estate investor or business owner, what does that actually look like?
Often people focus on cash flow being the most important puzzle piece to staying ahead of the market, but it’s only one aspect investors need to pay attention to. To maintain confidence that you will thrive in all markets, it means that you will need to build up reserves, have a generous advertising budget, push growth, create good profit margins, and maintain consistent sales. If you have a real estate business that you can scale up, with good profit margins, you can keep that going, stay afloat, and feel comfortable. Profit margins and having a safety cushion is essential, otherwise you are walking a tight rope. It’s a dangerous place to be! So, how do you increase your profit margins? Let’s find out.
Making Those Profit Margins Bigger
If you can build wider margins than you need now, this will save you for the future. I personally believe that the best time to market is during the roughest times. This is when others are being too conservative and there is a lot of opportunity.
Diversification is also a safety net for you. Balance out your investment strategies with other sources of income. Maybe now you find yourself solely working on fixing and flipping. Think about moving into turnkey rentals, private lending, or wholesaling to help add to your cash flow. The point is, don’t wait till you face issues. Build your sustainable and long lasting company now!