Cash Flow Statement Can Be Prepared In How Many Ways So You Want to Start Your Own Real Estate Business, Huh?

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So You Want to Start Your Own Real Estate Business, Huh?

First of all, let me congratulate you for choosing to be your own boss. It is one of the hardest and scariest yet rewarding decisions an individual can make. You will embark on an amazing, lifelong journey full of limitless possibilities. But make sure you are properly prepared or the result can be devastating.

The main purpose of this article is to serve as a detailed checklist for preparing, creating and structuring your own real estate business. I will also explain the benefits of detailed planning and management and the pitfalls of not doing so. First things first: what is the name of your new business? What type of business entity will you be setting up? Self-employed is the fastest and easiest; however, it may not have the necessary asset and liability protection that your business model provides. My favorite has always been the Limited Liability Company (LLC). It’s fast, cheap and offers an individual retreat.

Also, in which country will you be registering to do business? Are there state and/or local licensing requirements? All these questions should already be answered in your business plan. Some of you may be thinking, “I’m going to buy foreclosed properties, renovate them, and sell them for a profit. What additional explanation or planning do I need?” Well, if that’s your thinking, stick with your full-time job. I recommend that you go online (google) and download a business plan template to help you develop it.

In addition to your business plan, it is better to have projected financial statements, including a cash flow forecast, a projected income statement, and an expected balance sheet. There are many benefits to creating these statements. A clear view of your annual operating costs allows you to identify the number of real estate transactions you need to successfully complete to break even and/or turn a profit. Taking the time and effort to complete these tasks will help you overcome some of the major hurdles when starting a real estate business.

The biggest recurring mistake I’ve seen amateur entrepreneurs make is quitting their full-time job before they even close their first real estate deal! Insufficient capitalization is one of the biggest drawbacks when starting a new business. If you decide to leave your full-time job, make sure you have enough money to cover your living expenses for twelve months. Ideally, you want to have a surplus in your bank account to finance your business (ie – incorporation fees, licensing, marketing costs).

Finally, will you be self-employed or a business owner? No, they are not the same thing! Being self-employed means that when you stop working, your business stops too. If you’re not marketing to leads or answering phone calls, then no one is. Being a business owner (hiring and maintaining employees) allows for the freedom and independence that attracts people to start their own business in the first place. Most hobbyists leave their full-time jobs expecting to start and sustain their business profitably while playing golf or hitting the beach four days a week. WRONG! The transition from self-employment to business ownership is the most difficult hurdle to overcome. It took me nearly a year of interviewing hundreds of job applicants, working fourteen-hour days, working all-nighters, and sacrificing my personal and social life to successfully build and grow each of my businesses to the point where they could all operated on “Auto -Pilot.” Remember that a company is only as strong as its weakest link.

I hope what I shared with you was of great value. These observations and opinions are my own and come from what I have learned and experienced over the past five years through educational literature, private entrepreneur meetup groups, many real networking events, and, by far the most crucial and valuable tool, trying. There is still so much to discuss and write about, given that this topic alone is the basis for three hundred pages of Scripture! Here are at least the basics and a basic framework for preparing to start your own real estate business, including obstacles to anticipate.

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