How soon is too soon to set up shop?

10 Replies

I'm just starting out in the REI world in Suffolk County, Long Island, New York and focusing my time and energy on educating myself but I also want to keep moving forward while i'm still learning. I see my focus and strategy in buy and hold multifamily residential ultimately moving into commercial. SO the question is how soon should I be creating an entity, LLC, creating a website, printing up business cards, marketing, etc.?

@Timothy Ryan

My two cents is to hold off on the LLC until the need arises, i.e., you've found a property, get under contract, etc.

As far as business cards and a website, do it now. Business cards are still great for networking events and a properly optimized website can be a great tool for gather leads and writing articles to start getting you name out there.

Best of luck.

Originally posted by @Brooks Rembert :

@Timothy Ryan

My two cents is to hold off on the LLC until the need arises, i.e., you've found a property, get under contract, etc.

As far as business cards and a website, do it now. Business cards are still great for networking events and a properly optimized website can be a great tool for gather leads and writing articles to start getting you name out there.

Best of luck.

 This ^. Don't get bogged down in creating all these perfect little pieces before taking real action though. I did this for a while; I played with lists for direct mail, tweaked my website, read, read some more...

I realized I was doing "busy work" and fooling myself into thinking I was accomplishing something. Making offers on properties is the only way we make money in the end. Do that sooner than later. You don't need any of the things you mentioned to make an offer on a property. 

Hello Timothy, I agree with Brooks on this one. The only thing I would add is be certain you have reserves if your going the buy and hold route. Helps you sleep better at night.

Best of luck!

None of this stuff should be your focus:

creating an entity, LLC, creating a website, printing up business cards,

This, along with finding deals, should be.

marketing, etc.?

Its easy to be distracted by this stuff.   It doesn't advance your business.  Spend you time doing things that do.  Like finding deals.

@Kenneth B.  Could you go into some more detail about cash reserves please?

Sure. So I am still pretty new at this in that I bought my first single family rental in 2013. The mortgage company required 3 months reserves (I think, but possibly 6), but that could include anything in a retirement account. I wasn't using any retirement savings for the purchase so that was an easy one.

I stretched myself pretty thin putting 20% down but still had some cash to do the repairs that were necessary. It got to the point that if anything major happened I would need to borrow to do the repairs. Luckily that never happened. Any cash flow from the property has been put into the cap ex account and now I am comfortable knowing almost anything that happens can be taken care of. 

There is a lot of talk on BP about doing deals with no or low money. My opinion is that it all comes down to risk. If you buy a triplex and spend all your capital, Murphy's law says three months later a hot water heater will go, a refrigerator will go and the roof will start to leak in that spot the home inspector said to "keep an eye on it but it's nothing to worry about." Then what do you do? How much risk do you want to take? 

There are many great threads on here about reserves. I personally like to keep 6 months in reserves, and like I said earlier, it helps you sleep better at night.

Hi Timothy,

All that can be done while you are under contract on your first property :)  No sense in paying for a website (or anything else) til you are a little closer to needing it.  Focus on getting that first property, and plan for the second.

Kelly

@Kenneth B. thanks for explaining and sharing your experience, I appreciate it. I feel like CapEx is definitely one of those things that can easily get overlooked so case in point, have reserves. Got it!

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