How to Survive in All Market Phases (It’s About More Than Just Ensuring Cash Flow)

How to Survive in All Market Phases (It’s About More Than Just Ensuring Cash Flow)

2 min read
Sterling White

Sterling White is a multifamily investor, specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling was involved with the management of over $10MM in capital, which is deployed across a $18.9MM real estate portfolio made up of multifamily apartments. Through the company he founded, Sonder Investment Group, he owns just under 400 units.

Experience
Sterling is a seasoned real estate investor, philanthropist, speaker, host, mentor, and former world record attemptee, who was born and raised in Indianapolis. He is the author of the renowned book From Zero to 400 Units and the host of a phenomenal podcast, which hit the No. 1 spot on The Real Estate Experience Podcast‘s list of best shows in the investing category.

Living and breathing real estate since 2009, Sterling currently owns multiple businesses related to real estate, including Sterling White Enterprises, Sonder Investment Group, and other investment partnerships. Throughout the span of a decade, he has contributed to helping others become successful in the real estate industry. In addition, he has been directly involved with both buying and selling over 100 single family homes.

Sterling’s primary specialities include sales, marketing, crowdfunding, buy and hold investing, investment properties, and many more.

He was featured on the BiggerPockets Podcast episode #308 and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single family investing and apartment investing to mindset and scaling a business online. He has been featured on multiple other podcasts, too.

When he isn’t immersed in the real world, Sterling likes reading motivational books, including Maverick Mindset by Doug Hall, As a Man Thinketh by James Allen, and Sell or Be Sold by Grant Cardone.

As a thrill-seeker with an evident fear of heights, he somehow managed to jump off of a 65-foot cliff into deep water without flinching. (Okay, maybe a little bit…) Sterling is also an avid kale-eating traveller, but nothing is more important to him than family. His unusual habit is bird-watching, which he discovered he truly enjoyed during an Ornithology class from his college days.

Education
Sterling attended the University of Indianapolis.

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How do you ensure business continuity and sustainability in real estate?

This isn’t about being green (which should be a part of your business anyway), it is about ensuring you stay afloat and financially secure. The last few years have been a pretty good ride for virtually everyone in real estate. Young Millennials fresh out of school have been able to quit their jobs as clerks to flip houses and earn six figures a year, and many have made more.

Yet, if we learned one thing from the last housing cycle, it was that it doesn’t matter if you are making $100 million a year if it isn’t sustainable. In fact, if your finances and income are not sustainable, you just fall harder. So, as more people get into real estate and some markets continue to recover while others are starting to look pricey, how do you ensure continuity?

scaling-rentals

How to Ensure Survival in All Market Conditions

The most important factor here (and in finances and business in general) is ensuring that you have income (cash flow) and that your income exceeds your expenses. Once your passive income exceeds your expenses, you have achieved financial freedom. Once you are there, you never, ever want to lose it.

Related: The Big Difference Between Those Who Tank & Those Who Survive in Down Markets

Please don’t be confused by this post. I am still bullish on U.S. real estate. It is just smart to be practical and stay ahead of the curve. Stay optimistic for the best and be prepared for the worst, and you’ll be just fine. But what does this mean for real estate investors and business owners?

As the market evolves, you can bet we’ll hear more about “cash flow is king” and “it’s all about cash flow.” It is to some extent. But that’s only one part of the equation.

To ensure we survive and thrive in all market phases, it also means:

  • Building up reserves
  • Maintaining a strong marketing/advertising budget
  • Constantly pursuing growth
  • Establishing strong profit margins
  • Keeping consistent sales to maintain cash coming into your business

If your real estate business and investment strategy is scalable and the profit margins are there, you can ride any waves. If the profit margins and safety cushion aren’t there and you lack scalability, you’ll be on dangerous ground.

investment-plan

Building Wider Margins

Build wider margins than you need or want now to account for any potential slowdowns in volume and increases in expenses. I believe the best time to advertise and ramp up marketing is always during those rough times — because others are often being overly conservative.  

Related: 3 Crucial Areas Entrepreneurs Should Cultivate For a Sustainable Business

Then there is safety to be found in diversification of income streams, too. Augment your strategies with other sources of cash flow. If you have been focused on fixing and flipping houses, consider rolling over some of that highly taxed income into turnkey rentals, crowdfunding, private lending, or wholesaling as extra sources of cash flow.

Most importantly, don’t wait until you run into an issue and then come back to this post you bookmarked. The time to build in sustainability is now.

How are you ensuring sustainability in YOUR business?

Let me know your thoughts with a comment!

The real estate market won't always be booming -- are you ready for a possible downtown? Bulletproof your business with these tips.