Always Ask to Level the Playing Field
Joe Ponce Always Ask to Level the Playing Field It never hurts to ask a business for a concession when you need it. I was recently a bit cash-strapped because of some big bills and a slumping economy in my market. It seems we are living high on the hog or waiting for the down period to pass. I was trying to guard my ready cash because many of my annual bills come due this time of year. I also had cash in some other startups to carry me through these times in the future (I hoped) so I was a bit nervous about my cash flow situation. Ordinarily, I have a fund I keep going for exactly this time of year but I was forced to drain it because of several special assessments for my properties in the form of management association requirements. You know those friendly neighbors that get together and decide you should contribute 6k to the ground water runoff committee? You take the good with the bad when you invest in some areas and it is always good to have a backup plan for cash flow. To tell you the truth, in my business, I often look to finance the properties I sell because of the ability to fill them quickly. I like taking payments at a good interest rate. This does not mean I let just anyone in, but I am flexible and reasonable. I decided a few people needed to be a bit more flexible and reasonable with me this particular year. I usually do not ask for a concession when it comes to paying these annual bills, but I was tired of taking a big bite out of my account at the same time every year and did not feel like scrambling my business to do it anymore. I wanted to level my budget and the playing field. Level the payments if you can. To me it is important to anticipate your monthly inflow and outgo of cash. In fact it is critical. That is the purpose of a budget right? Well, one year I had to get back to basics and understand this process all over again. When you get scattered out in this business, it is easy to forget some basic principles that you need to abide by for peace of mind. Here are a few of the areas I was able to level to anticipate the cash flow needed to cover the annual bills. Insurance: We all need it to some degree. For those of us in the rental market, a liability policy is a must. With the number of properties I have, I use a single agent that gives me a great price. Well . . . I decided to ask . . . "Is there any way to spread these payments out over the year so I can manage my cash flow better"? I asked. "I think so", he said. "Let me check with the company that underwrites theses policies." He came back with a much more manageable monthly payment than the annual pound of flesh it took to maintain the policy. Yes, I paid a bit of interest on it, but it was worth it to keep my cash working for me at a higher rate. Taxes: You normally do not think about these if you are an average home owner. However, in the real estate business, these can pound you annually. Because they do not escrow these amounts with certain financing you may be able to attain, you get bit by them at the end of the year. I do not like getting bit. Since the financing company will not do it, why not ask the county tax assessor? I found out that there are several different programs to allow you to pay your anticipated taxes either monthly or quarterly depending on your preference. In this particular case, I would rather spend the $500 per month than the $6,000 tax bite at the end of the year. Now I know what some of you will say. If you managed your budget and escrowed these funds yourself, you could earn interest on the money or at least have it work for you during the year. They are absolutely correct. There is a lot of this type of wisdom that is not lost on the busy investor. However, you sometimes have to manage your time with a cost in dollars. I could set up an escrow fund that invested in some money market account or something much more creative and profitable like mortgages, tax liens, or other items. Sometimes you just want it to be simple and it is worth the extra $75 that it will cost you over the year. Heck, we spend that at a nice restaurant these days. I cannot afford to worry: There is a cost to worry that may or may not be expressed in a dollar amount. However, it eats at you like someone with sandpaper going after a part of your body. I want to keep my blood pressure low and have everything anticipated as much as I can. Surprises cause stress and stress is not always good. "Why should I have to worry?" I have invested part time (meaning I have a regular job) for over 20 years. My job causes me to worry mainly because I could be sent over for my fourth time in a combat environment. I call it a job, but to me it is service. I chose to serve the military in the field I am in. Oddly enough, I am less worried about the combat environment than I am as to who will take care of my business while I am gone. Sure, I will retire in a year or so and pursue this investing career full time. For those still working a job, it is important to have a few things lined up. Can you support your cash flow that you have now with the income you expect to generate when you leave? If not, than you have some more planning to do. While it may be morbid, some of us may not come back and that makes planning all the more important. Let's clear the air here. Yes we have lost people in current conflicts. We lose many more to heart attacks and accidents every day. We are all at risk no matter where we live or what we do in life. Many of these will land you on the operating room table no matter what sort of life you have chosen. So planning is the key to making it all happen, no matter what your choice of profession. Keeping expenses manageable is one of those things we have to deal with. The idea that we always have to do certain things is not the mark of a successful creative real estate entrepreneur. We always look for ways to improve our position on the playing field. Never forget to ask how you can do that from those that serve your business. You will often be very surprised at what solutions they have engineered . . . and happy that you asked. So . . . always ask. About the Author
Joe Ponce is a master real estate investor and full-time Chief Information Officer in the U.S. Army. He has purchased or controlled over 500 properties and is largely considered to be one of the area's foremost experts on manufactured home investing and internet marketing. His latest venture, http://www.WealthAddress.com educates new investors about the power of successful internet marketing. You may reprint or publish this article anywhere you deem appropriate as long as the author’s bio and any/all links within are intact. Joe Ponce may be contacted at http://www.wealthaddress.com. Click here to view more articles by Joe Ponce. Reprinted with Permission from IdeaMarketers.com
|
