Things I've Learned From Jumping Off Too Soon

Entrepreneurship is a hot word nowadays. Everyone wants to work for themselves. It's the American Dream: build a business and live in complete freedom.

I did exactly that over six months. I jumped off full-time into my real estate business. At the time, I was a minority owner in one mobile home park. Due to the structure of that deal, I had negligible cash flow. I took the majority of the cash up front to fund more deals. I jumped into the deep end with limitless amount of enthusiasm. My thought was being full-time should dramatically increase deal flow and the business would be at a ‘living salary’ after a few months. It didn’t. Some would argue that I went way too soon.

Today, I am a minority owner in two mobile home parks. While things are looking up and I'm young enough to take a large risk, my cash flow situation is still below the poverty line. I make less than my tenants.

Here are a few things to consider if you are going to make the jump:

- If you are leveraging other people’s money, it takes a considerable amount of closed deals to make a living wage. Plan accordingly.

-As much as you learn via forums and podcasts, you will still make mistakes. While education is important, don't wait forever to get started. I followed a due diligence guide from a high reputable investor and still missed some critical information; it comes with the territory. One property had a water leak that costs over $10,000. Luckily, the rental market is strong and the rising economic tide has kept rental rates elevated to compensate for a miss in due diligence. The one way to mitigate your shortcomings is to buy at an attractive price. In other words, have a margin of safety. The money is made at the day of closing.

- Make sure you understand your weaknesses. I dislike cold calling people. I do it but it always seems to make it until the end of the day before I pick up the phone. Somedays, I manage to weasel out of it. Be honest with yourself. What crucial business tasks do you dislike or perform poorly at? Have a plan to make sure the work gets done.

-There is an adage in real estate that if you find the deals the money will come. This is true to a certain extent. The one thing to consider is that the deal structure won't be ideal when you are starting out with no track record or capital. My advice is to take less attractive deal terms to get started. Even partner with other active investors for less to get your foot in the door. If your goal is to grow a large business, your first deal won't be your last.

While it is paramount to be optimistic about what the future holds, be honest about your reality and be prepared for the rainy days.

As always, feel free to reach out.