5 Ways to Avoid Financial Stress When Starting a Real Estate Business
Make it Work!
To the uninitiated, getting into real estate will sound like The Dream.
After all, ‘there’s a lot of money to be had in real estate,’ isn’t there?
But to you, the person actually starting their own real estate business, it might, at times, seem like a nightmare.
Financial stress is common across all industries – and most business owners will at least once in their lifetime wake up in the middle of the night, drenched in sweat, with receding thoughts of their bottom line flashing before their eyes.
Let’s explore how you can keep these nightmares at bay and avoid financial stress as much as humanly possible.
Be financially savvy
People say that you need money to make money. They also say that a penny saved is a penny earned.
Whichever camp you want to align yourself with, the message remains the same: you need to know where you stand in terms of finances to be able to both avoid stress and utilize your resources to the best of your ability.
First of all, reading up on money management is an excellent step to take. Most people who start their own business know nothing about money, management, and financial management. They know a lot about their industry and how to do a good job, but it will take more than that to make it.
You can also get yourself a money management tool that will help you track how much money is coming in, what your expenses are, and what the future holds.
If you don’t want to store your data on an app, you can create a simple sheet for the same purpose – whatever works for you, as long as you can know where you stand by taking one look at it.
Stay on the right side of the law
A lot of business owners try to cut corners when they see an opportunity to do so – and later end up regretting their decision immensely.
When you choose not to do things by the book, you’re risking the future of your business, and your good night’s sleep as well.
True, there are entrepreneurs who have made a fortune by staying firmly in the grey area of finance. But when you’re starting out, especially if you’re a rookie in the world of finance, it’s important to educate yourself on all the rules and regulations that apply to you and stick to them.
The more you know about how your business works and how you fit into the bigger picture of the real estate market, the more likely you are to find ways to maximize your incomes without having to risk your good name.
Keep track of your cash flow
Staying on top of your cash flow is probably the most important aspect of running a real estate business.
Here is how you can do that:
- Make sure you invoice all of your clients properly and on time. Keep track of each expected payment date, so that you’ll be able to predict the state of your bank account.
- Plan a budget according to your expected income, not according to your expected expenses.
- Break down your cash flow according to the fluctuations in your business: if certain seasons are slower than others, don’t forget to factor that in.
- Budget your marketing expenses wisely – and leave some leeway for your marketing ROI.
- Use different means of business financing wisely – if you need an influx of cash, make sure you find the least expensive way to access it.
- Don’t be afraid to invest if it feels right. But always know how a dip in your cash flow will impact your day-to-day operations.
Plan for growth
Your real estate business should also have a projection of growth: where do you want to be in a year, in two years, in five? And more importantly, how are you going to get there?
Business plans do more than just attract potential investors – they should serve as a blueprint for every action you take as a business. If you have done your research well, and have mapped out your path based on actual facts instead of mere ideas and guesses, your business plan is the guide that can save you a lot of financial mess.
The thing about growth is that it can be difficult to deal with. It will require expanding the list of people you work with, taking on new properties, and managing more money. If you don’t know in advance how you’re going to handle all of this, when the time comes to expand, you might find yourself at a loss.
Make smart decisions
Running your own business can lull you into believing that you suddenly have access to more money than you previously had. Don’t make the mistake of treating your business’ funds as you would your own.
Keep it smart, and don’t spend all your business income on things you don’t actually need to grow and thrive. Choosing to invest in real estate technology could help expand your business. But a new space decked out in tech’s finest won’t help you achieve something better than a basic home office would. Don’t invest in it just because you can.
Look at every business decision you can make from this point of view: what would the best version of yourself do in this scenario?
Making decisions from that headspace will significantly change the way you handle business. After all, if what you’re about to do clearly doesn’t contribute to your goals and plans for the future, why make the wrong decision?
Working in real estate requires a specific set of skills, and more importantly, a tenacity and savviness not all of us possess. But if you’ve already taken the plunge and are ready to run your own show, know this: things will get tough, finances will be tight at some point in your career, but at the end of the day, you are also the one calling all the shots. Trust yourself to make the right decision.