Personal Finance How To Manage Your Money As A Real Estate Investor



Real estate investment is one of the highest-paying income-generating machines that many people are after. Although real estate can come high or low, it will still be in demand as more and more people look for a real estate property.

foreclosure collusion
Real estate investors bidding against each other. Image courtesy of Fog City Journal

Being a real estate investor can either make or break your path to financial freedom. You can benefit from your real estate investments. However, if you don’t have self-control, you are risking your financial stability. Imagine all the lost profits if you don’t budget your money.

To avoid such an incident, it is essential for you to learn how to control your personal finances. Some books and sites like MoneyTaskForce.com provide useful tips to educate people on how to value their hard-earned money. Below are also some tips that could help you deal with your financial struggles:

1. Create a Financial Goal With Your Real Estate Investments

As mentioned, real estate investments are a good source of income. You can be the landlord of an apartment or the owner of the commercial spaces and other properties that you rent out. You can also buy, develop, and sell real estate properties.

But whatever real estate you invest in, you should have well-defined financial goals. For you to easily achieve your goals, follow the SMART principle:

  • Specific – if your goal is to gain profits from your rental units, then you should define it clearly. You must be specific on how much you want to earn through your real estate investments, especially when it’s your full-time career. For instance, instead of being too broad on the profits, you can indicate a specific target amount for your rental units on a monthly basis.
  • Measurable – your goal must be easily tracked. So if you want to earn USD 25,000 monthly from your 5-unit rental apartment, then you must set a rental fee of USD 7,000 each unit if the expenses will take USD 2,000 for each room. 
  • Achievable – define a goal that you can achieve and how you can achieve it. It’s achievable if you or other people have done it before. For instance, you have to ensure that all rooms are occupied if you want a higher income.
  • Realistic – if your goal seems impossible to reach, then you might need to adjust it. If you feel that it will become more of a burden than an achievement, it means it would be difficult to attain it. Consider the location of your property or its nearby infrastructures. You’ll probably get more tenants or buyers if the property has a good location.
  • Timely – a goal without a deadline may keep your budget exhausted. If you’re building a commercial space, you must set a timeline for it to be finished and ready to be occupied. This way, you’ll avoid overspending while maximizing your profits.

2. Create a Separate Budget for Personal and Investment Purposes

After setting up your goals, you’ll know how much you need to produce from your real estate investments. However, you must also create a separate budget for your personal finances to avoid spending your real estate investment profits for personal use.

Also, creating a budget for your real estate investment will help you monitor your progress towards achieving your financial goal. Here’s how you can create a budget for your real estate investment:

  • List down all the start-up costs you’ve used in investing in real estate properties. Specify the expenses and indicate the source of funding.
  • You should come up with a contingency plan on how you can cover up more months without gaining from your real estate investment. Maybe you can have side hustles to provide for your expenses for a few months.
  • Also, enumerate all your actual monthly expenses and operational costs. For instance, car expenses for meeting clients, traveling to and from the properties, and the like. This tip will let you know how much you need to pay for your assets and liabilities so you would avoid spending from your personal pocket.

3. Invest Your Earnings and Let Your Money Roll

Even if your real estate investment is thriving, it must not end there. You can let your money roll by investing in other businesses. Find out other means to help grow your money.

Based on your goals, check whether your profits are what you’ve projected. If yes, then continue with what you’ve started. But if it’s way below your profit goals, think of other ways to let your earnings roll.

Don’t stop when you’re not halfway through your financial goals with real estate investments. Instead, invest your earnings to the following to increase your profits:

  • Buy More Properties – Search for properties that are sold cheaply online or at your place. Choose the ones that are directly sold by the owner as they don’t have a broker or finder’s fees. You can also buy properties that are outside the city because the prices are cheaper than those in the metropolitan areas. Redevelop the properties, then sell it at a higher rate or rent it out for longer profits.
  • Invest in REITs – If you want to make a passive income without the hassle of owning and maintaining properties, REITs are the answer. Real estate investment trusts or REITs allow you to invest your money so real estate property owners can use it to manage, develop, and purchase more properties. You’ll get dividends as a form of profits from this type of investment.
  • Trade REITs – If you want to manage your money through REITs personally, you can buy and sell REIT shares. You can hire an online broker or brokerage firm to trade your shares.

Conclusion:

Without managing your money from your real estate investments properly, you’ll end up losing all the hard work of starting your investment. And if you think that it’s hard to manage your profits from real estate investment, you should start planning now and challenge yourself to stick to your plan. Without trying, you’ll never know how to manage your real estate investments.

Comments

  1. I never focused on investing and wasting time and money. This article Crisp and clear and it enlightens me. Thank you very much.

Speak Your Mind

*

This site uses Akismet to reduce spam. Learn how your comment data is processed.