3 Key Steps to a Successful Real Estate Investment Business

education_steps_blog
By Brian Pulis

Does cash flow keep you up at night?

Or do you find there just isn’t enough time in the day to accomplish all that there is to do?

You’re not alone!

Many business owners find that these two areas are the cause of most of their stress. 

As a real estate investor, I’ve found you simply cannot ignore the basic business principles that lead to success in this industry. Like me, you will surely experience ups and downs as you make your way forward. But, maintaining focus as a business owner will allow you to overcome most challenges. 

I’ve had my mental resilience challenged on many occasions during my time building and operating a company. Things don’t always go as planned and being prepared is vital. It’s a fact of life, as well as business, that the unexpected can happen and your response will define your future. 

However, even the most focused individual can lose their frame of reference when it comes to creating a company that will be in business over many years.

What led you to want to become a real estate investor?

I can’t imagine the prospect of being a landlord attracted you to the industry.

The question is actually much deeper than the acquisition of the property. What does this asset/investment/business represent to you and your family?

And what is it that you want from the experience?

If you don’t know, you’re not alone. Most business owners are so focused on their current reality that they focus little time in leading there business to where they want it to go. It’s vital to understand what YOU want as a real estate investor. We all want profitability, but without an underlying, personalized vision as a foundation, real estate investors can struggle to keep their organization moving forward when tough decisions have to be made.

In this post I will focus on the last three steps that have been instrumental to me in building my business: Knowing the numbers, Day-to-Day Management and Continuous Learning

Knowing the Numbers

To work with banks and gain access to quality, long-term mortgages for our properties, it’s imperative to have strong cashflow. The effective management of cashflow is usually one of the most difficult areas for most new business owners, and it is certainly the leading cause of stress within the modern office if not managed proactively.

So, how do we avoid this stress?

We maintain complete control with our analysis.

Cash is king and if we want banks to say yes then we need to have plenty of it coming in. Yet most business owners don’t truly know how much revenue it takes to operate their business profitably.

Unfortunately, many don’t know what their true profit was for the year.

To have cashflow, while operating with little stress, we must have money coming in at an equal amount if not greater than what needs to go out. That’s nothing new. The challenge usually lies in calculating how much cash we need to be bringing in and when.

There are plenty of great Property Analyzers out there that work well in establishing if a property generates cashflow. My issue with Property Analyzers is that they concentrate on the property and tend not to factor-in operating expenses such as stationary, phone expense, vehicle expense, accounting and so on.

Some of these costs may be one-time expenses, but most require a cash outlay on a regular basis. To operate any business successfully we need to know the numbers and have tools to monitor our progress as time goes by. Some time spent up front in creating a budget can go a long way in keeping you on-track.

Using a spreadsheet, we can prepare a budget that determines what revenue is coming in (rents), itemize all of our expenses for each property, and then finally itemize our overhead costs. If you are looking to draw an income, you would need to include this as well. In the process of creating this spreadsheet, you learn valuable information about your business. You may uncover expenses that you didn’t realize you had. (A client of mine uncovered an error with their cell phone provider that in the end credited them a few thousand dollars). Most importantly, you will have a tool that will tell you if you are steering for trouble or not.

If your bookkeeping is up-to-date, this will be quite simple to complete. If not, perhaps this is one other reason to hire a bookkeeper today.

Day-To-Day Management

If you’re a business owner in today’s marketplace, you’re under a tremendous amount of pressure from various areas. How you plan your schedule will determine how you and your organization respond to the pressures you’re put under.

Investors should try to strictly follow a daily routine within their work.

Another important part of this scheduling process is learning to say no to outside influences. Remember your strategic vision we discussed earlier? This is where it comes into play. You cannot lose focus on the purpose of your organization, despite the temptation to try something different.

Business owners should also be in regular close contact with their team on the pressing issues affecting their organization. By holding regularly scheduled meetings with the company team, addressing their concerns and following-up with them, business leaders can drive effective operations over the long-term, on a day-by-day basis.

Next to cashflow, day-to-day management is also a great area of stress. There’s just not enough time in a day to do everything you want or feel you need to do.

Here are 3 keys to being a great business manager:

  1. Time Management – A day planner is essential, but what’s more important is how you discipline yourself to stick to it. The biggest culprit is distractions that come from so many angles. Learning to be selfish with your time and saying no more often can save many hours in a week.

    Work to your agenda and not to that of others.

  2. Under Promise/Over Deliver – This has been something I have witnessed many times as being a leading cause of spending time in an inefficient manner. A side effect of over promising is chasing your tail trying to meet the perhaps unachievable expectations you set.

    In today’s global market, eyes are on us from the sidelines observing our actions and slowly formulating an opinion. It’s from here where amazing future opportunities materialize.

    A career is never a straight line; if you’re like me, you will look back at all the things you did over the years and see that your previous positions and action was a dress rehearsal for what you’re doing now.

  3. Slow and Steady – Often, while building my businesses, I found myself with an unsettled feeling that I wasn’t aggressive enough or pushing myself hard enough. What’s important is to take action but to ensure the steps you’re taking are solid and not based on a weak foundation.

    Business is competitive and real estate investing tends to attract competitive individuals.

    Pushing ourselves outside our comfort zone is imperative to growing, while satisfying ourselves without biting off more than we can chew. Oftentimes, “less is more.

Continuous Learning

Like physical fitness, continuing to educate yourself and expanding your network pays huge dividends over time. Be open to learning and pushing yourself to be the expert in your field.

Every bit of success depends heavily on this final step.

For example, your vision will expand by surrounding yourself with brilliant and inspired people.

Networking provides the ability to expand your team with individuals who are like-minded.

The education component assists with understanding the different departments and the infrastructure to put into place.

As a business owner, staying informed is vital to the overall success of your business. What changes in the marketplace could have a positive or negative effect. Upcoming changes such as banking rules, government regulations, tenant laws or infrastructure upgrades could affect your bottom line.

I especially like industry-specific networking groups where you have an opportunity to meet with many people and share experiences. It’s a great way to keep your thumb on the pulse and hear things early to give you ample time to navigate your business.

All aspects of our business are influenced by the time we put into learning and networking. To me, time spent here is relative to the results I can expect to achieve.

Want expert insight into building a real estate business that makes money instead of takes money? Our REIN E-Report provides expert insight into everything real estate!{{cta(‘1be66a74-7dfc-4e67-a1de-5a41539de3f0′,’justifycenter’)}}

Brian Pulis has been in business for 30+ years and got into Real Estate investing in 2002. A REIN member since 2003, Brian and his son Kyle co-founded Pulis Investment Group, which offers investors a Hands-Free, RRSP eligible opportunity to invest in apartment buildings. Contact Brian at brian@pulisinvestments.com 

Leave a Reply

Your email address will not be published. Required fields are marked *