Updated over 4 years ago on . Most recent reply
Investing vs Reinvesting
I'm curious...
For those that are self-employed or own business. How do you decide what you can invest into your primary business versus cash flow you invest into real estate?
I've developed my own formula over the years, but I’d love to hear yours!
(For me 10% of my business income are distributed as profits and invested in RE. Once the RE business has grown, I can reinvest capital gains and 5% if the RE portfolio games back into buying more properties with the lowest amount of money down possible.)
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- Real Estate Broker
- Cody, WY
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Good question! I don't use a formula. My property management company produces the income I use to live on. I've structured my business to ensure it produces a good income worthy of my effort, plus a net profit that could be used for investing, vacations, etc.
We also sell real estate. Because we earn enough from property management to support us 100%, anything earned from sales commission is our investment money. Every penny earned from sales goes directly into an investment fund and is used to purchase property. As we purchase property, any cash flow from those properties is dumped right back into that fund and used on investments, accelerating our growth.
The point is, there's no need for a formula. If we earn $50,000 in sales commissions, that gives us $50,000 to invest. If we earn $300,000 in sales, that gives us $300,000 to invest.
It makes it easy on my brain. :)
- Nathan Gesner
