At what rate should your business grow?

So you already have your first deal…or many even a few. When is the right time to purchase your next property? That is something that takes honestly assessing your financial abilities and responsibilities. Many new businesses are debt heavy and this is why the first several years can make or break it. Your income needs to be sufficient enough to not only cover expected costs, but also unexpected costs and build up savings!

• How have you purchased your current properties? Cash? Mortgages? Other types of debt? Take these things into serious consideration because debt can be a cash-flow killer. If you have so much debt to pay that you can’t save money for emergencies, this could spell disaster.
• If you’re self-managing your rentals, can you take on more tenants? Honestly assess the amount of time that’s already demanded and see if adding more tenants would significantly change that. Of course, properly screening tenants will minimize issues and “babysitting.”
• Will the bank give you another loan or mortgage? Many times, a bank will only give so many mortgages. They also need to see your payroll and tax information to prove performance. At the same time, building a relationship with a bank can sometimes make it easier to get multiple loans.
• What is your end goal and have you given yourself a realistic time frame to achieve it? For instance, you can’t expect to be able to live off of your rental income within 2-3 years if you currently have mortgages and little equity. Again, debt really changes cash flow. So before you purchase another property, be sure that you can pay off your current assets in a timely fashion. You don’t need 100 properties to make a living. Just a few paid-off properties could be all the income you need. It’s all about your goals and you’ll have to do some math.

Real estate investing is rarely an overnight success. You’re constantly learning. You must always keep up with changing rental and real estate laws. Real estate provides not only cash flow, but wealth, that you build over the years and can pass on to loved ones. Build your business with care and patience.

Credit: www.junkyardwisdom.com