How an investor handles success will tell you a lot about how effective they are in their field. This is certainly a good problem to have, but if you don’t take success in the right way, you may actually be doing more harm than good. There is an immediate temptation to use this money to grow your business faster than the pace it is currently on. Here is where you need to exercise discipline and take any success you get in stride. If you spend capital that is not really there, you will end up causing severe damage to your business. Investors are advised not to grow their business faster than it can be supported.
After every successful transaction, you should ask yourself what caused it to happen. Were you a product of being in the right place and the right time? Are your marketing efforts starting to pay off? Most importantly, will you get another deal from whatever source generated the lead? Even if you are confident there are more deals to come, there shouldn’t be a need to overreact to this. If you have been working out of your home office, do you really need to spend money on an office space? If you have money coming in you should keep it going to the areas that were most efficient (marketing, lead generation, mailings) instead of areas that are a luxury and not necessarily a necessity.
Growing too fast could mean hiring an assistant when you don’t really need one or spending money on unnecessary marketing plans. You should track the spending on every aspect of your business so when things do work you can put your money in those places. Items that can directly increase your business or grow your local investing presence are always good ways to spend money. Before you spend, you should take the time and ask yourself if this is something you need or something you really want. If you spend money on things you don’t really need, you will end up regretting it when your business truly does need something.
If excess money is burning a hole in your pocket, you can always put it into your reserves. Most investors fail to have ample cash available in the event a tenant stops paying or the furnace busts in the winter. Putting money aside for when the inevitable does happen should be your first priority. Only after this money is in place should you look to allocate elsewhere. Don’t spend your money in places that don’t have a great return or you can’t pull out of in the event of an emergency. In the event of a sudden vacancy and you can’t cancel a marketing campaign and pull your money out. If you used your excess money for a down payment on a small condo, it may just have the equity you are looking for.
Just like no two deals are alike, no two investors are either. Each investor can have an investing strategy unique to them and their goals. What worked for a fellow investor may not work for you. Grow at your own pace and on your own terms. Getting money in, but spending foolishly, will leave you right back where you started.