Renters Warehouse Blog

How to Fix an Investing Strategy That Is Moving Too Fast to Maintain

How to Fix an Investing Strategy That Is Moving Too Fast to Maintain

14/3/2019

We have all heard the phrase “slow and steady wins the race.”

When it comes to real estate investing, this is certainly true.

While you must move quickly in certain circumstances –such as when closing a deal, generally speaking when it comes to a long-term investment like income properties, you’ll want to take a slow yet steady approach –and ensure that you’re scaling your investments at a sustainable pace.

But what if you suddenly find that things are moving too quickly? It’s happened to the best of us –maybe you’re knee deep in a fixer-upper when suddenly your dream investment property comes on the market. You’ve made an offer –and it’s been accepted! But now, you find that you have two properties, no real property management plan, and no investment strategy in place –other than “turn a profit.” Maybe you’ve ended up with a few more properties a bit too quickly and now you’re struggling to oversee them all.

If this sounds like you, don’t worry! You don’t have to offload your excess properties for rock bottom prices, or resign yourself to taking a loss. Instead, there’s a lot that you can do build a solid foundation, enlist the help that you need, and get back on track with your properties –and making a decent profit.

With this in mind, let’s take a look at some of the problems that arise from moving too quickly  –and see how you can apply a back to basics approach to address your growth problems quickly and efficiently –getting your investing career back on track.

Problems That Arise From Moving Too Quickly

The problem with moving into deals too quickly is that it is almost impossible to manage multiple properties –with no experience, right off the bat. Consider, for a minute the following analogy:

Managing property is like throwing a tennis ball up and down. Almost anybody can do that. Managing two properties is like juggling two tennis balls, which a lot of people can do. But then you add the third ball and the percentage of people who are able to do that goes way down.

Just as a business often has trouble if it scales too quickly, without a proper structure in place, moving too quickly with real estate carries its own set of risks.

Here’s a look at a few potential problems now:

  • No Time to Learn From Experience

Starting out with one investment has a number of benefits. Namely, it allows you to learn the ropes and get a feel for things before you start expanding your investment portfolio –and there’s a lot more risk at stake. It’s important to be able to give enough time to the process in order to work out the details and issues as they come –giving you a chance to learn from your first property before you move onto your second one.

  • Not Enough Time to Research

Research is key to a successful investment. When you rush into an investment, you don’t always have time to fully assess the property in question. This, of course, increases the likelihood that you’ll end up with some potentially bad deals that won’t perform the way you were hoping.

  • Unprofitable Property

Finally, one of the main risks with an investment that has moved too fast is a property (or properties) that are producing a net loss. If you find that your property’s breaking even -then you’ll want to go back to the start –and ensure that you have a solid investment strategy in place.

Fixing Rushed Investments

So, you’ve gotten yourself into an investment that is going too fast, perhaps you are losing money, or have ended up with bad deal –is there hope? Of course!

  • Slow Down

While it might sound obvious, the first thing you need to do is slow down.

There will always be great deals out there –and you don’t need to buy them all at once. Start with one and build from there. Take the time to develop good systems, and a solid investment strategy –and work to create a scalable process. There’s a learning curve that’s always involved with investments, and you’ll want to take the time to familiarize yourself with the ins and outs of income properties by learning the ropes with one property, before you rush into buying a second.

  • Create Scalable Systems

Treating your investments like a business from the start means that you’ll be able to create a solid investing framework within which you can grow your portfolio. Remember: just being busy isn’t enough to find success –instead, it’s about taking a strategic approach –and making smart decisions that’ll increase both your cash flow as well as provide long-term returns.

Start by creating a plan for investing –establishing your long-term goals –monthly income, retirement, passive income; and then outlining your specific investment criteria. You’ll also want to create business processes, and establish a system for everything from paying bills to taxes. In most cases, having a folder for each rental, and putting relevant paperwork for each one is a simple way to stay on course. Using a system like Quickbooks or Freshbooks when you’re first getting started can help you to stay on top of income and expenses and other bookkeeping tasks. Many landlords also find that hiring an accountant for taxes can further help to reduce their workload, making it easier to scale their investments.

  • Stabilize Your Investments

Next up, take stock of your investments. How are they performing? It’s important to ensure that your properties are providing returns that fall squarely within your investment criteria. This means determining what type of returns you’re looking for (10%? 12%?) and then only investing in properties that meet your criteria. If you have a property that’s underperforming, you’ll want to see if there’s anything that you can do to improve its performance –maybe increasing rents, or perhaps fixing up the property to attract more interest. If not, then consider whether it’d be a good idea to sell the property. Of course, be sure to talk to a CPA to find out how selling would impact you from a tax perspective. It’s also important to keep in mind that just because your rental may be underperforming, doesn’t mean that you have to sell it at rock bottom prices! Avoid the temptation to simply offload a property, and try to recapture any losses by listing it for a fair market value.

  • Hire Property Management Help

Finally, and perhaps most crucially, being able to outsource many of the time-consuming tasks can free you up to scale your investment portfolio. While you may be able to oversee one, or two –even three properties on your own, once you start expanding beyond that point, you’ll find it a lot more challenging to juggle everything –and may even start to drop some balls. This is especially true if you’re planning on investing in markets outside of your own local area. When calculating your projected income and expenses for a potential investment, consider adding property management fees into your equation. Being able to outsource the day-to-day work involved with directly overseeing a rental will help you to establish a framework that you can seamlessly scale –helping to set yourself up for long-term success.

At the end of the day, it’s far easier to scale when you have a solid system in place. Take the time to ensure that you’re treating your investments like a business from the start, and look to purchase properties that are in line with your investment criteria. Then, take the time to source a good property manager, if you’re planning to invest out of town or grow your portfolio beyond one or two properties.

With a solid framework and systems that can be scaled as your property empire grows, you’ll be able to set yourself up for investing success –both immediately, and for the long-term as well.

Investors: have you ever found yourself in over your head? What steps did you take to correct it?