1. You should stabilize your financial situation
Some people say “I have no money. That is why I want to start a business to make lots of money.”
If you are totally in survival mode, which means you are looking for money to live today, maybe you should get a second job to stabilize your financial situation first. It does not mean you need to make a lot of money, but at least you have to get out of such a survival mode.
Then you should check your income and expenses. This financial management should start now. Some people say “I don’t need that because I am not making a big amount of money.”
That is wrong. You should start now and check how much you are making and how much you are spending and for what. This should be your habit. If you start doing that right now It would become much easier to manage vast amounts of money later on.
This is very important. You can find out about unnecessary expenses. Then you need to make cash flow. Even $100, $200 or $500. Initially it could be a small amount. You need to live within your income and you need to make a cash flow.
People use Credit Cards a lot. Average interest is 19.24%. If you are buying unnecessary items, spending for not important things with credit card and making a minimum payment, your financial situation will never become better. Many people make Impulse Purchases. People are spending around $5000 a year from impulse purchase. Even people are buying a lot of food, but you end up not using all of it. Money is being wasted.
You have to control your desire for consumption. You must manage money. You must have your budget. You have to cut all kinds of unnecessary expenses and save even a dime.
You never spend more money than you earn. You never use money for unnecessary items. You should not waste your money. You should differentiate between necessities and luxuries.
You should live within your income and make some cash flow. Make sure you have some cash reserve. This is the most important thing to start your business and this is the starting point to become wealthy.
2. You should have a right motivation to start your business
I often ask people “Why do you want to start your business?” Most answers are “I want to make more money.” “I don’t like my job” “I am working for a long time, but I don’t get paid enough.” “I want to do anything I want at anytime. I need freedom. I want to control my life.”
I understand that kind of answers very well. Once we start a business and create some wealth, we soon recognize money is always a by-product of our service and value we provide. Money comes to you based on joy you give or appreciation you receive.
There are two things I want to say about motivation. First, your motivation should be beyond money. Second, your motivation should be beyond yourself. Your motivation to start your business should not just be making money for you to live comfortably. Successful people started their business for the greater purposes and focused on how they can provide more value to people.
3. You should have a right business mindset
We often say “Business is like a marathon, not a sprint.” It means it would take time to stabilize your business and to start making good profit. Of course it depends on your efforts, but in general, operating for at least 3 years to stabilize your business. Some people think “I want to make money tomorrow, or next month.” In most cases it won’t happen. If you want to get some money tomorrow. You should get a job. Once again business is like a marathon, not a sprint.
Also I have to say business is not easy. If you hear anyone says “You can make money easily”, I have to say they are telling a lie and try to sell something. You should not think you can make money easily. There is no easy way to make money in any business. There is no “Get Rich Quick” plan to make money. Easy money goes away sooner or later.
People think business is easier than employment. That is totally wrong. Especially self-employment is much more difficult than working for someone else. It is because you have to do everything. You are CEO and president, You are CFO, You are a director. You are a manager. You are an accountant. You need to do everything by yourself. Then it takes time to start making profit. Sometimes you make profit. Sometimes you don’t make any money in a month. This is totally different from employment. Mentally you have to be tough to overcome such ups and downs every day.
I often use this kind of metaphor. If financial independence is Heaven, and difficult situation is Hell, I can say, we are going to Heaven by way of Hell. To start your own business, you need to get ready to jump into a difficult situation. Otherwise you will complain about the difficult situation in the business and you easily quit.
I have to say one more thing. You should start your business as a part time. Then once you start making profit and you can replace your current income with the profit from the business. Then you can fire your boss. This transitional period is tough. You are working for somebody else and also you have to do your own business. You have to do both. That is why this period is very tough. Anyway, you should not quit your job expecting you can make a big profit from your business soon.
4. You should understand the nature of Real Estate Investment business
Sometimes people say I don’t like sales. That is why I want to do real estate. This is totally wrong. Real estate is mainly a sales business. To succeed in real estate business, you have to focus on marketing.
Actually in any business, the key to success is marketing. The most important activities in any business is marketing. Marketing means lead generation.
In real estate investment, you have to find three things; seller, buyer and money.
80% of your time should be spent for marketing. It means you should focus on finding seller, buyer and money.
Some say “I like rehabbing. I like fix and flipping. I like land lording etc.”
It is better to have some experiences to get involve in those kinds of strategies, but basically you will let a contractor work for your rehabbing project and you can ask somebody to manage your property.
You as an investor should focus mainly on marketing.
You should understand this clearly. If you are about to start RE investment business, you need to understand this.
If you cannot do marketing, you will never succeed in this business.
I hope you understand these important 4 things to start your Real Estate Investment Business.