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Surviving and making a living in the real estate market isn’t always easy, and you have to develop a wide variety of habits so that you always keep your cash flow positive. No matter what state the market is in, if you act proactively and think far enough into the future, you’ll have no problem making more money than you spend.
The main problem that many agents have is that they think that if they are drawing in an enormous amount of money, $100 million, for example, then that should make them feel comfortable and safe in the long run. However, that couldn’t be farther from the truth. You have to spend a considerable amount of money to make money in the real estate market, so no matter how much money you’re drawing in, it won’t matter if you don’t net a positive cash flow.
The first habit that you must develop is to always make sure that your static income is greater than your expenses. While you can look for bursts of income, you need to make sure that even if your normal income remained the same you wouldn’t have any difficulties paying your expenses. Even if your passive income is $50 million but your expenses are $60 million, your incredible income won’t mean anything.
The other main keys to staying alive at any market phase is to build up reserves, keep consistent sales, maintain a strong marketing budget, establish strong profit margins and constantly pursue growth.
Building wider margins is extremely helpful because if you compensate for any future slowdowns in the marketplace, then you can both maintain positive cash flow and invest in advertising while so many other agents are struggling to deal with their payments. If you are the only agent prepared to heavily invest in advertising during a slow period for the market, you’re in a much better spot than your competitors.
In addition, you can significantly bolster your foundation by diversifying your income. For instance, if you’ve been focusing on fixing and flipping houses, perhaps it’s time to investigate crowdfunding, wholesaling or turnkey rentals so that even if the housing market sags, you have plenty of other steady sources of income.
In essence, the key to surviving during both the highs and lows of the real estate market is preparation. Don’t wait for a sag to pull back. Prepare for the sag so you can aggressively push through it. If you can net a positive cash flow at all times, you’ll be in a much safer and more lucrative position.
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