Part I: Property Managers Info Series: SMALL BUSINESS TIPS FOR SUCCESS IN REAL ESTATE

Want To Reach Financial Freedom Through Real Estate? These Small Business Tips Will Help You Do It.

This three part article series will be released one section at a time over the next three weeks. Every Thursday we’ll introduce a new section of this article which will introduce a new small business concept that you can put into practice so that your real estate investments can take you to Financial Freedom.

Part ONE will be about the proper mindset you must have to be successful in real estate investing, or any business you choose. In Part TWO, we’ll dive into the property and discuss how to buy them right, maintain them for a life-time and advertise your properties to your desired clientele. In Part THREE we’ll discuss how the lease is your front line of protection for yourself, your property and your business.

A business that’s built solidly in the three areas we’ll discuss can take you from where you are today - all the way to your dream of financial freedom. Check back each week in February to learn about each of the pieces that combine to make a sturdy foundation for your real estate business. Each month after that, we’ll take a deep dive into one aspect of the foundational principles and share more in depth information about each of those topics.

PART ONE: Treat Owning Real Estate Like A Business

Whether you consider yourself a landlord, rental property owner or a real estate investor, owning property and leasing it out to others is a business - And you need to treat it like one. Treating your real estate investing activities like a business doesn’t need to take the fun out of investing and it won't suddenly make all your real estate investing activities more boring. Quite the contrary actually.

Once you begin to treat owning real estate like a business, you immediately realize that makes you a business owner. As the owner of a real estate business, you can design this business to operate in any way that you want it to. You can set any revenue or net profit targets you want and set up your operation to achieve those goals in any number of ways.

You can also set your business up to be as hands-on or hands-off as you want to be. Let’s face it though, most of us invest in real estate because it gives us a realistic path to escaping our 9 to 5 jobs. If we start treating real estate like a business, wont we just be replacing one job with another?!

That’s a reasonable question and unfortunately it is very easy for that to happen. The following points are three tips you must follow to make sure your real estate investing activities are able to yield the results you’re looking for and don’t become another job you’re trying to escape.

Be Organized

Whether you’re in the growth phase of the business or you already have 20 cash-flowing rentals, one key to your business success is that you stay organized. If you’re in a growing stage and are looking to acquire your next few properties, there are specific tasks you should be doing to find and vet the next deal and specific ways you should be spending your time so that you can reach your goal. A real estate business is just like running any other type of business: you can’t just wake up each day and start doing whatever task you feel like doing. Well, actually, you can do that, but you won't be in business very long.

KPI’s

If you want to run your business like a business, it’s important for you to determine which activities must be performed in order for you to achieve the goals you’ve set for your business. Those essential activities can be organized into key performance indicators (KPI’s). Once you’ve determined your KPI’s you can develop a daily, weekly or monthly action plan specifically designed to help you complete your KPI’s.

Get Help

Once you’ve identified the KPI’s that must be done in order for your business to achieve its goals, you may find that you don't have enough time to perform all the tasks that are essential for your business’s success. You might also find that you do have the time to perform a task, but you don’t have the desire to do it or maybe you don’t have the skills required to perform that task at the level needed. If you find

that your time, skills or desire are not adequate to complete any task that’s required by your business, then it’s important that you get the help you need. Look to partner with someone who can get the job done or outsource the work to a contractor.

Staying organized will take on a whole new importance when there is more than one person involved in your operation. You’ll need to stay organized to keep track of the tasks the other person is doing and to be sure the tasks they’re performing are benefiting your business in the way you expected. As the size of your operation grows, you will rely on others more and more. Your ability to stay organized will allow you to hold all your helpers accountable and keep your business running in the right direction.

Schedule

When your work is organized based on KPI’s your work day will become more focused. It’s important not to let that focus get derailed by having a haphazard work schedule. Everyone’s day will not fit into a nice pattern of checking emails for an hour and then working in nice little time blocks until quitting time at 5pm. Many real estate investors are pulled this way and that way throughout their day, as they do whatever it takes to get the job done and keep things running. That being said, however, it’s often a good idea to set up, at least, a little structure for your day.

Maybe structure for you means that you work on big projects during the first part of your day when you’re most alert and you save some of the more routine tasks for later in the day. Maybe you set up a rule that your workday isn’t over until your three KPI’s are completed. However you decide to move through your day, it’s a good idea to have a schedule that makes it possible for you to get important business tasks done.

Learn From The Best

Thinking like a business owner is a skill that can be developed. Fortunately, you don't have to learn these skills on your own - there are lots of great books out there that can help. We've listed a few here that can help you get in the right mindset, structure your time more effectively and learn to focus for success.

The Four Hour Work Week

E-Myth Mastery

The One Thing

Use Systems

If you know other business owners who just seems to get a ton of stuff done in a day or someone who consistently exceeds your expectations on one thing or another, you’ve probably wondered what the secret is to their extraordinary and consistent productivity level. I’ll tell you the secret. It’s their systems.

High performers may or may not recognize the role systems play in their success, but I guarantee you they use systems, whether they know it or not. Systems don’t have to be elaborate, detailed processes that take hours to complete, although they can be. More commonly a system is just a standard way of doing something that has repeatable inputs and predictable outputs.

You might have a system for touching base with the partner you’ve outsourced some of your KPI’s to. You might have a system for handling incoming tenant phone calls, collecting rent, performing move in/out inspections or a whole host of other things that can be made into a repeatable, efficient process. Systems make operations easier by taking the guess work out of your activities. You don't have to spend time trying to figure out how to handle routine tasks. Your systems allow you to handle those tasks the right way and do so efficiently every time.

When setting up your business, it’s important that you have systems in place for running the operation so you can remove yourself from any task you don’t want to perform. The systems you create allow someone else to perform tasks for you while still allowing you to have control over how things are done.

Separate Your Finances

Now that you’re a business owner, proper bookkeeping is a must. No more intermingling personal funds with money from your business without accounting for those transactions properly. There are several reasons to keep your business funds separate from your personal funds. One reason is so that you can see how much money your business actually makes or loses over a period of time. If you intermingle your funds, you may not be getting a clear picture of your business’s financial health and you could be sinking money into a failing business.

Keeping your business funds separate from your personal funds is also important when it comes to filing and paying taxes. The IRS has strict and very specific rules for what counts as a personal income vs. business income, personal expenses vs. business expenses, and even personal vs. business gifts and loans. Uncle Sam treats each of these items differently so it’s important that you have all your personal and business income and expenses in the proper categories so you can take full advantage of all the tax deductions, write offs and credits you’re entitled to. You don’t have enough time or the impeccable memory required to go back over all your transactions at the end of the year and separate your business transactions from personal, so it’s best to keep them separate from the beginning and save yourself a world of trouble.

A third reason to keep your business funds separate from your personal funds is to preserve your liability protections. Many real estate investors set up LLC’s to provide them with legal protections for their personal assets should their businesses default on debt or be sued. Mixing business funds with personal chips away at those protections by piercing the corporate veil. Piercing the corporate veil makes it difficult to distinguish between the entity and the person and means that a business owner can be held personally liable for the company’s actions and debts.

One of the first things you can do to keep your business funds separate from your personal funds is to set up separate bank accounts for your business and your non-business activities. This means you will have separate accounts with credit and debit cards used exclusively for business or for personal use. You’ll also want to set up an accounting system like a simple spreadsheet or a more robust system like Quickbooks for keeping track of your business transactions.

Once you’ve gotten your business bank accounts and bookkeeping system in place, you’ll be able to track financial metrics that can be useful in evaluating your businesses performance and help you keep operations on track. Some of these key metrics are Net Income, Cash on Cash return and CAP Rate. These terms and other popular real estate business metrics will be detailed in an upcoming article.

Conclusion

Treating your business like a business by staying organized, using systems and keeping your finances separate are three concepts that serve as the foundation to any successful business. Real estate investors are just like other business owners who need to be sure they don’t overlook these three fundamentals.

If a real estate investor is the owner of a business, then that makes his rental property the product of the business. In the next installment, we’ll discuss how to make your rental properties into amazing products that are always in high demand from your business’s specific customers.