What would you do?

[Sam1]

Hello Everyone, A couple of years ago I read Robert
Kiyosaki`s "Rich Dad Poor Dad", then Don R. Campbells
"Real Estate Investing in Canada". I made my first
real estate deal last year where I bought a condo and
sold it a month later for a profit.

I realized when I bought it that I wasn`t making a lot of
money in my fulltime job. If I had to put 25% down on every deal
then it would take me a couple of years to save enough to be able
to do my next deal. So I used the money I made from the
condo deal, borrowed the rest from my father and bought a business
to increase my income.

My business is now half paid off, and will be paid off later in
the year. My plan is to take all of the profits and continually
invest it into real estate and then rent it out.

My question is: Should I wait until the business is paid off before
I get started, or am I able to start investing now?

 

[George]

Good afternoon,

My first suggestion would be to sit down with some advisors you trust who know, or shortly will know, more about your situation before providing their ultimate advice. For example, what I find very interesting is that if I understand your posting, you will have purchased and paid off a business in a two year time frame. That sounds impressive and may have been quite a return on your money. Perhaps you should be expanding the business or acquiring a new one for example. Again, not knowing much about your situation, perhaps you should be investing further into your real estate/business education so that you can make more of your opportunities.

I don`t believe that there is a problem in the slightest in owning a business or two (whether or not there is debt) plus investing in real estate. It`s done very frequently. But, you don`t want to kill yourself financially, emotionally, physically, family perspective etc. trying to do too many things at one time. Systems are important of course. I still struggle with the balancing act and know others do as well.

Warm regards...

George

 

[RedlineBrett]

Don`t wait to buy real estate - buy real estate and wait.

If your business is humming along and you are cashflowing enough to keep your own lights on I would start pumping the remainder into RE.

One question:

1. Having been in business only for a year do you feel confident in the `cycles` of your biz? My partner and I both run businesses outside of our investment company and we are still getting hit with new little `bumps` from time to time. Have you stashed money away for some of the `what ifs` your company could run into? Failing that, do you have access to credit to keep the business afloat if you intend to further leverage yourself into more property? You want to set up the means for short term lending when you CAN, not when you NEED to.

But after that... if your business is doing well and you feel confident and want to put up some property numbers then GO FOR IT! My only advice would be to help keep some liquidity by buying properties that are easy to sell in the early going (not that expensive and no `owies`) just in case the sky starts to fall and you need some money out within a few months. If you are using money partners then you may want to structure your deals that minimize your short term risk while you wait for your properties to appreciate.

Good luck!

 

[Thomas Beyer]

think MULTIPLE income streams ..

so yes, you should keep one business and do real estate part-time, then perhasp full-time if it interest you more .. or do both at the same time .. I ran a SW company and a real estate firm in parallel .. ramping down the former to 0 in about 4 years while maximizing profits while growing the latter ..

Re "should I pay down the loan on my business or invest in real estate": Likely you can make FAR MORE in real estate than the interest rate you pay on a loan. Of course, real estate profits are usually highly variable, possibly negative if done poorly, whereas a business loan at prime + 4% (or 10% annually) is calculated easily. But even with 25% down you can usually make far more than 10%/year in any decent real estate deal in any decent growth market. So, I`d opt for: go slow on the 10% loan repayment and be more aggresive on the real estate side. Watch your TIME commitment .. as this is usually the bottleneck .. you can always find money .. but it is harder to replicate yourself .. so delegate things that you are not good at or don`t enjoy, create systems that work, find team members (employees, mortgage brokers, realtors, lawyers, money partners ..) to free up time for things that yield the most: finding JV partners, creative marketing, finding/negotiating deals ..

 

[Sam1]

Thank you all for your advice.

I can tell the knowledge you all gave came directly from
experience and really got me thinking both from a human,
and a technical point of view. I am going to take all of
your advice you gave to my advisor and plot a course for the
next couple of years.

Thanks Again...

Sam.