Every time you think you have enough money, something always seems to come up. This is usually the case with life, but more so when it pertains to your investing business. Your finances have an impact on every decision you make. This includes what areas you invest in to what kind of marketing you do. If you do not have enough money to get started or are constantly making bad decisions based on your current financial situation, you need to reconsider what you are doing.
Money should not be the ultimate decision maker in every situation, but you should always be aware of your bottom line. Start out by looking at how much money you have available for a down payment or for any upgrades you can make after you buy. If you do not have ample funds for the 20-25% down payment, it will change the way you invest. You will then be forced into looking at less expensive properties or left looking for private money financing. If you have just enough money to get through the closing, you will then be reliant on credit cards to get you through the rehab phase (if that is your option) and may look to cut corners to save money on costs and labor. This will come back to bite you when it is time to rent or sell. You will either look to take a lower offer just to cash out or won’t get as much as you thought.
If you are looking to invest for the long term, you need to do some kind of networking or marketing. Anyone who has marketed knows that to do it right you need money behind you. Any mailing you do won’t have the desired impact if you only mail it once or if the materials aren’t as polished looking as they should be. Even the best mailing list is only as good as the presentation. By not having enough money to do this, you will find your marketing efforts disappointing. As a result, you will not get the return on your money you would have liked.
There are various items that can add up quickly such as title searches, inspections, business cards, bandit signs and web site development that, if are ignored, can impact your business. While you may not need money to make money, to sustain your place in the market you will eventually need capital or access to credit. Credit should only be used as a source to make money on your money. If you are paying for items on credit, eventually the credit will run out and leave you with a mountain of debt.
The finances and economics of every deal are the most important items to be evaluated. It is important that you look at the big picture, know all of the costs associated and weigh the short and long term impacts of every decision you make. Some of these decisions you make may cause you to take a step back to take two steps forward. That is OK, as long as you have the big picture in mind and are thinking two moves ahead. If you don’t think about the economics of every decision, sooner or later you are doomed to make a bad one.