Make your cash flow smarter. No matter how much you’re pulling in, managing that cash flow is essential to your long-term success as a real estate investor.
When you’re starting your real estate business, the most difficult skill to master is the management of cash flow.
Honestly, it’s a little like farming. You plant the seeds, some begin to grow and at some point you get to reap the harvest. That is, of course, if the weather and bugs and soil conditions all manage to provide you with the expected outcomes. That happens sometimes. It also doesn’t happen sometimes. And when it doesn’t happen, your fixed expenses are still there, waiting to get paid.
Managing your seed money and the somewhat unpredictable flow of income can give you nightmares when you’re starting out. It’s easy to get excited and spontaneously buy yourself a Ferrari when you suddenly find yourself in a position to (guilty!). And if you come into cash flow problems, you likely won’t have your real estate business for very long.
The good news is, there are many strategies ease this challenge.
My best advice and most straightforward takeaway here is simple: spend less than you earn.
Take the farm analogy I mentioned earlier, sometimes the harvest isn’t what you expect. For that reason. your cash reserve is essential, not because you might have cash flow problems but because you will have problems.
In fact, my property management spreadsheets have built-in monthly amounts to go into a rainy day/maintenance fund for each new property I acquire. That way, my cash flow still comes in but I’m also saving.
I’m really not the type to hold out hope for the savings on my morning latte… which is why I love Ramit Sethi’s recent book.
If you haven’t checked it out yet and you’re a real estate investor, you really will love Sethi’s new book, “I Will Teach You To Be Rich“, where he goes beyond your grandma’s “Don’t spend it all in one place” frugal attitude to give you actionable advice to save your money.
The strategies and tips shared in this book are terrific. They are simple to implement, easy to understand and make sense for homeowners, employees and yes, entrepreneurs.
If you are in the process of starting a business, or living the nightmare of cash flow blocks, have a look at his blog and see if there’s any tips you can implement for yourself.