No boat, no vote. That’s what Mike Scudder would say whenever we were out on his boat and someone would offer him constructive feedback. You see, it’s considered poor etiquette to offer suggestions to the boat owner when you have no financial interest in the operation.
Scudder was like an uncle to me. He and my Dad were very close and as a kid our families would go to the river almost every weekend during the summer. These were formative years. I learned how to water ski – an activity I still enjoy today. I also discovered that it is an expensive hobby.
First of all, you need a boat. Next, you need a place to store the boat, a vehicle large enough to tow the boat, lots of fuel, a ski, rope, life jacket and a good boat driver. With an investment like this it’s no wonder boat owners get so miffed when a land lover tries to offer up their input. This may also be why you hear that the two happiest days in a boat owner’s life are the day he buys the boat and the day he sells the boat.
Are you treating your real estate investment business like a hobby? If so, that can be expensive too.
Do you have a written business plan? If you don’t, chances are you might be operating your business like a hobby. Are you tracking your income and expenses on a piece of scrap paper? You might be treating your business like a hobby. What’s your balance sheet look like, your P&L statement? If you don’t have a way to quickly produce these reports then you might be running your business like a hobby.
Okay, I didn’t intend for that last paragraph to sound like a Jeff Foxworthy you-might-be-a-redneck routine – it just came out that way. And remember, I said if you do any of the things listed above you MIGHT be running your business like a hobby. It’s possible you’re doing one or all of the things I mentioned and operate a highly successful real estate investment business. That’s great! You can stop reading now.
My point is this – if you plan to expand your real estate empire beyond an occasional flip or buy and hold, either using bank financing or partnering with private lenders/investors, then you need to have a solid business plan in place, along with good financials.
This year instead of that sweater, cheap cologne, pajamas, or socks maybe you can convince your loved ones to go in together and buy you Business Plan Pro software and Quickbooks 2011 Pro.
Business Plan Pro software is simple and easy to use. There are hundreds of sample plans and templates to choose from. I recently used this software to put our business plan together and our investors can now read it in a password protected area of our website. Frankly, I’m not sure how many of them have actually read it but I’m sure it must make them feel warm and fuzzy because we took the time to write it. I’m also certain they wouldn’t have partnered with us if we didn’t have a business plan.
Last week, I updated from Quickbooks 2008 Pro to Quickbooks 2011 Pro. I’ve been using Quickbooks for about 8 years but didn’t really understand its power until about two years ago. Up until then I classified everything as either an income or expense. Then I took an all day class and met with my accountant to get a more thorough understanding of the software and its features. These days I can generate profit and loss statements for an individual property or the entire company. I can instantly email a balance sheet to an investor looking for in depth financials.
Now you can help your friends and family get their holiday shopping done early by forwarding them this post. Hopefully, they’ll get the hint.