Mike Singletary elaborates on the need to have a budget and plans for costs for each deal so you know where you stand and what your capabilities are. In addition, as a real estate investor, you need to be comfortable with leveraging (whether it be hard money, loans, etc).
Mike H.: Welcome to the We Buy Ugly Houses show, where real investors share real investing stories and lessons from the trenches, where our team buys thousands of investment properties each year. Now, let’s meet today’s host.
Mike S.: Hey, my name is Mike Singletary. I’m a DA in Austin, Texas. Today, I’m the host of We Buy Ugly Houses Show. And what we want to talk about today is money management. Needless to say, this is a very capital-intensive industry that we’re in. And yes, you could go broke pretty quickly and most people think you going to go broke by just signing up bad deals, which obviously, that would happen. But another way of going broke is poor money management.
One of the things I mean by that is that you really have to budget out your hard costs in advance. You have to plan everything that you want to do within the next year. You have to understand that every exit strategy has a monetary commitment. My DA advised me that again, you should do wholesales and I absolutely agree. Of course, I wanted to come in and flip houses and keep rentals, but I didn’t quite understand how much capital it cost to do that.
We’re in a very lumpy business and so what happens is that a lot of money comes out before a lot of money comes in. And so you want to constantly manage your cash position and make sure that you’re in the right position to take advantage of an exit strategy. You don’t want to be in a position what you have to wholesale something where it was obviously a much better deal to retail it because you’re so tied up on some other properties and you didn’t really position yourself accurately.
Leveraging. You have to be comfortable with leveraging, especially early. Leveraging means using an outside source of financing. When I see a lot of people come in and they don’t have a lot of deals at the beginning and they’re like, “Well, I’ll just buy the deal myself,” rather than using hard money, or private money, or if you already have a bank loan, that’s fantastic. But just for my understanding, it’s a cost of doing business. You want to be able to do more deals and leverage it out than try to fund a few deals and kind of hurt yourself in the future. I hope that was helpful to you and I’ll see you soon.
Mike H.: Are you looking to get started in real estate investing or take your investing business to the next level? HomeVestors, the “We Buy Ugly Houses” folks, is the number one home buyer in America, where our franchisees purchase thousands of houses each year, many of which started with little to no experience. If you’d like to chat, please visit UglyOpportunities.com/contact. Learn more from the We Buy Ugly Houses Show, an amazing HomeVestors team, by watching more shows at UglyOpportunities.com/show or by finding us on iTunes or Stitcher radio.
Mike Singletary is a HomeVestors franchise owner with businesses in both Austin and Waco, TX. As acting Ad Council President and Development Agent for the Austin area he has a passion for mentoring and leading new franchise owners. Since joining HomeVestors he's gained vast knowledge of new developments, rental portfolios, wholesales, and much more that he shares with his colleagues.