Your Cash Flow Business Is Sinking

[NeilUttamsingh]

Real Estate investors tend to be a very strong headed bunch of people that work hard and are goal oriented. Yet at the same time they have a very difficult time admitting when they have screwed up.


Whether an investor owns one property, three properties or three hundred properties there are some early warning signs for when a real estate investor`s business is sinking.


These early warning signs are:

1) A Lack of Enthusiasm
2) Decreased Cash Flow





A Lack of Enthusiasm






If you are around the real estate investing game long enough, you notice that some investors become `burnt out` as time goes on.


Real Estate investors can get `burnt out` at any stage of their real estate investing career. I have personally met investors that have become completely burnt out after investing for 5 years and under. I have also met real estate investors who have become `burnt out` after over 20 years in the real estate investing business.


Once your enthusiasm begins to dwindle, you need to address this issue promptly, otherwise you are in for big trouble.


A lack of enthusiasm means that the landlord becomes less responsive to their real estate investment business. This can prove to be a fatal error. If you take a back seat approach to running your business, a lot of problems can arise.


Due to the fact that an investor takes a back seat and is now less responsive, this could mean that they:

• Become lazy when responding to repairs and maintenance issues. For example, their response time to a tenant request could have been 24 hours at the beginning of their investing career when they were full of energy. They may have now become fed up with investing and as a result, are much slower to respond to tenant request. Maybe now, instead of taking 24 hours to respond`it takes them a week or longer to respond. Trouble really starts to arise when the landlord stops responding on first contact by the tenant. This is a horrible move on the part of the investor when it comes to customer service.
  
  • Not inspecting rental properties. This can cause even the smallest repair item to compound in magnitude over time. For example, a small piece of rust in a bath tub might seem insignificant. If not looked after, the rust will turn into a hole, and the resulting water damage that the house will incur will be significant.
  
  Failing to thoroughly screen tenants. Every real estate investor, who has been in the investing game long enough has more than likely rented to a tenant that they thought was great before they moved in, however, ended up as a nightmare tenant. If your enthusiasm for our business declines, you will not exercise the same due diligence in screening tenants that you once did. Maybe you have dropped the ball is this department, or maybe you have outsourced the tenant locating process to someone that doesn`t really care who rents your property.

No longer rewarding tenants. ` At the beginning of their real estate investing career, an investor may have provided their tenants with gift baskets at Christmas and the periodic gift card to show their appreciation for being good tenants. Now`well now, the landlord doesn`t give them anything. When the investor no longer has enthusiasm towards their business, they are not doing the little things like this, which make all the difference in the world, especially when it comes to retaining quality tenants.


Decreased Cash Flow


As a real estate investor, you are simply a ship out at sea.

One of your main objectives is to navigate your way through the water. The water represents real estate investing and you are the ship. One of the problems when you are out at sea is that the waters become very choppy.

Without question, choppy waters and storms arise, while you are out at sea. These tough times are directly comparable to the tough times that you will experience as a real estate investor. I relate the choppy water to all of the problems that you would encounter, such as non-paying tenants, dealing with dead-beat tenants, major repairs, and long unexpected vacancies.


One of the key factors that helps to keep your boat afloat during these tough and very scary times is your cash flow. Without cash flow, your boat will sink.

You can think of your cash flow as your life boat.

`you can rely on your cash flow to keep you alive, during the tough times.


Plain and simple, cash flow keeps your real estate investment business alive. As soon as you start to experience a decline in your over all cash flow levels, this matter needs to be closely monitored and dealt with promptly. If you have no cash flow being generated from your real estate business, you will not be able to `weather` the choppy waters or the storms that arise during your real estate investing journey.


Remember`


Cash flow keeps you afloat, during the good times and the bad.


Best Regards,


Neil Uttamsingh


ps: I like pictures. Do you? Subscribe to my blog so you can read more fun picture posts like this one!

 

[housingrental]

I normally agree with your posts Neil but I'm not sure on this one


After one month some investors are burned out but still slog along and make a profitable go of things


Maybe I'm just an oddity?

 

[gwasser]

Adam,



I didn't think you ever burnt out! (where are those darn emoticons!)



I think Neil means that ultimately the lack of cash flow drives you out of business. If you see your cashflow deteriorate you know it is time to pull up your pants and improve it.



To be honest, I am a lazy landlord. So I farm my rental operations out to property managers or rental pools. Right now, I only manage two places myself. Neil was, according to me, more writing from the point of view of managing the place yourself.



Eitherway, I think you both have a point. I don't always like to do my real estate accounting or look at tenant damage. That doesn't mean that my real estate investor career is over. There are always ups and downs.



BTW. I love those pictures.

 

[EdRenkema]

Adam its not the investing that burned you out its those long apron strings - you know what I mean!

 

[Rickson9]

Speaking for msyelf, it's never boring making money. However, having said that, I don't do any of the work myself. I try to ensure a purchase price so ridiculously low that it really isn't an issue to pay a third party to handle it.



Best regards.

 

[Thomas Beyer]

this is an excellent post .. thank you !!

 

[NeilUttamsingh]

Hi Adam,



Thanks for your response. This is an interesting perspective.



I would agree with you in the sense that some investors that get burnt out early, and who keep on investing, take on a very negative view of investing. (I see this a lot in the blogging world now)



I would also say that their overall enjoyment level with regards to life, and with regards to real estate investing is non existence.



This has been my personal observation, with the real estate investors that I have met and spoken with. Mind you, I have only been investing for 6 years, so I still have a lot to learn and a lot of 'burnt out' real estate investors to talk to, whether in person or via the 'Blogosphere'.



In the past 6 months or so, I have dealt with 2 different investors that have been investing for over 30 years.



The common trait with both of these investors was that they had a passion for the business and they never allowed themselves to become 'burnt out'. They never gave up, no matter what.



When I look at these 2 investors and learn from them, it becomes more clear to me that the way to succeed as a real estate investor long term is to never give up, and to never allow myself to get burnt out.



Thank you for always reading my posts Adam!



Happy New Year!



Neil.

 

[NeilUttamsingh]

Hi Godfried,



Thank you for the feedback on the pictures!



You hit the nail right on the head....



You said:



"...If you see your cash flow deteriorate you know it is time to pull up your pants and improve it."



When I see this happening (decreasing cash flow) on my rental properties, I know that I either need to take immediate action, or plan out a course of action to take if the cash flow drops below a certain level.



If I am complacent, and ignore the over all cash flow being generated, I could get into a lot of trouble when tough times arise. (multiple vacancies + non paying tenant + who knows what!)



Thanks for your feedback.



All the best,

Neil

 

[NeilUttamsingh]

What property type are you buying Rickson9, and in which province?





All the best,



Neil Uttamsingh

 

[NeilUttamsingh]

Thank you Thomas.



I appreciate the feedback!



All the best,



Neil Uttamsingh

 

[fdrover]

Neil,



I really enjoyed this post in particular. I agree wholeheartedly that cash flow is the lifeboat. I sail every summer in Conception Bay, NL on my 27 ft tradewinds. I usually take my father in law, let's call him Crusty, for first mate or on occasion, ballast. Most days the winds are calm and from the West. Great sailing for a couple of novices.

On occasion, however, the winds pick up and shift around. Waves become choppy and the original feeling of satisfaction and of being in control is but a memory. If you are already on the water you head to port or you ride it out. If you are on land you either stay there or you put on your oilskins.

Each one of us is a different sailor with different levels of experience. What would make me turn around and head to port might be what would make another head to sea. As I think Brian Tracy says, If I'm a level two person looking at a level six problem, its seems foolhardy. So what do I need to do? I need to become a level 10 person through education and experience so the level six problem is no longer a problem, just an annoyance.

Sail more often, in increasingly windy conditions, accompanied by those who have been there and done that seems to make sense to me. If you can't do that, you can always post on REIN. ha! ha!



Fraser Drover

droverproperties.ca

 

[gwasser]

Hi Fraser,



Super analogy for every investor. Including the remark about posting on REIN.

 

[Rickson9]

[quote user=NeilUttamsingh]What property type are you buying Rickson9, and in which province?





I Neil, I'm currently buying condos in Phoenix, AZ. There was a discussion of it here:

http://myreinspace.com/public_forums1/f/62/t/17378.aspx



Great blog posts btw! Keep up the great work!



Best regards.

 

[JBagorio]

Hi Neil,



First of...Good post!



I have been in this RE business for over 5 years now; as most of others call it "In a part time basis" given that I do this on the side, besides my main profession. With the primary job aside, I would say my real estate gig is never dull. Despite the ups and downs I can't say I have felt or experience what you call being burnt-out or at least not yet. I love every minute I have spend growing and improving my business. We have to remember that cash flow issue is every type of business's problem not just in real estate and for sure is the key to be successful, but it shouldn`t discourage us. Instead it should pump us to work harder. I would say that if one were to feel burnt-out and feel demotivated they are in the wrong business or profession, and the common solution or advice would be is to get out and find or discover the type of work what will make them happy and able to give all their best 110%.



I will use my late Grandfather as the subject for a minute. Growing up I have watched him run and manage his own businesses. When I was a child I remember tagging along with him in his daily routines. I have experience first had how he enjoyed what he does, and the best part, that he always have his family around and involved. I have always wondered why he never did take time off or vacation elsewhere. Till one day I got the courage to ask him. You know what I got for an answer? He told me `I don`t need it` he never needed to take off given that he loves and enjoy his family business. It took me a while to truly understand what he meant. Now it came clear to me what he truly meant. As a business owner he only has himself to blame and respond to in terms of the operation. He did not have any stress (the kind that most of us have working for someone) given that the problems are his own. It's just different when you feel the sense of ownership in all that you do, because it becomes part of you and you are willing whole heartedly to do all the best to make it happen and will not let it fail.



Best regards and Happy New Year to all!!

 

[NeilUttamsingh]

Hi Jason,



Thanks for your thoughtful comment.



You made a statement that I really agree with. You said:



"It's just different when you feel
the sense of ownership in all that you do, because it becomes part of
you and you are willing whole heartedly to do all the best to make it
happen and will not let it fail."



I totally agree with that statement. Like many of us know, when you are doing something that you really enjoy, it does not feel like a 'work'. It does not feel like a burden. It is a great feeling when you find yourself in that situation.



Thanks again for the comment Jason.



All the best,

Neil.