Thinking about RE as a Business
While listening to a BP Podcast this morning and hearing about the interaction required by the investor as it related to funding and negotiating a deal, I got to thinking how much my Real Estate interactions have allowed us to catapult into the entrepreneurial lifestyle. When we as RE investors as thinking about funding, financing, cash flow, solvency, rental cycles, CAP Rates (just to name a few) we are actually thinking about the operation of a business. You hear quite frequently that in order to succeed in real estate you need to treat it as a business. But what does that really mean? Coming form a W2 (9-5 job) background doesn't exactly lend itself to understanding this principal.
I wanted to try and start this string to hear some peoples stories of growing form a W2 income based person to a business owner and what allowed that to happen.
To kick it off, a little over 2 years ago my wife and I started pursuing RE aggressively and this pursuit is what lead us to where we are today. In the past 2 years, we have built our portfolio and started 4 RE companies and a few others. Had we not started treating RE like a business, we would most certainly still be working at our jobs. What I believe initiated our paradigm shift was when we consolidated our homes with a local portfolio lender, completely separating our investments form our personal life. We then started treating our rental and home sales incomes (100%) as business income, allowing this to be reinvested over and over. This also strengthened our relationship with this lender and paved a clear path of our successes for other investors and lenders to see. This path has in turn allowed us to grow our business and develop new businesses with confidence from multiple lenders in the public and private sectors.
In short, separating our personal and private financials was from my memory the start of this paradigm shift.
I would be interested in others stories on this subject!