On this Veteran’s Day I was reminded of how much I learned about how to be successful in business from my experience as an Army Aviator. (FYI – our company is Veteran Owned).
For years I was a helicopter pilot, first Hueys, then Blackhawks. In aviation, we place a great deal of emphasis on mission planning. That starts with understanding the mission. Is your mission to add $____ per month to your retirement income. Or are you trying to fund a college education within ___ years?
To use our old mission planning format, you would:
1) Analyze the mission – what are you trying to accomplish?
2) Perform a reconnaissance – where is the best place to invest? Do you need to invest where you live or should you invest in another market?
3) Choose the appropriate modes (of flight) – Do you have the resources to pay cash and renovate? Do you only have a down payment? Are you handy and can you perform any Rehab? What is your level of risk tolerance? Can you manage C- properties? Are you willing to visit these properties personally? After dark? How important is it to you that your house never appears on the evening news?
4) Prepare (your maps) – get a cash flow analysis tool and assess your probable cash flow. Make sure there is enough money in reserve (fuel) so that you do not interrupt your household finances.
5) Choose primary and alternate (routes) – Do not get target fixation. Build a “buy box” that meets your mission objectives. Make offers that fit within that “buy box”. If any counter-offers do not fit, and you can’t negotiate a win-win, then move to the next opportunity.
6) Communication – if you will manage it then you need to be readily available to your customer (the tenant) 24/7/365. Things will break. And they will need to be fixed, some urgently. Murphy’s law of maintenance – the probability of an emergency maintenance situation is directly related to how inconvenient it will be for you to handle it. If you choose a property manager, make sure they have the communication capability AND access to vendors for after-hours service.
7) Risk Assessment – Make sure any vendor you use has Work Comp insurance so they do not sue you after getting hurt on your property (premises liability). Make sure to evaluate the risk associated with laws related to being a landlord (Fair Housing, Fair Credit Reporting Act, Fair & Accurate Credit Transactions Act, Service Member’s Civil Relief Act, and all of your State and local landlord/tenant laws which include avoiding wrongful eviction or constructive eviction).
I highly recommend investing in rental houses to enhance your net worth and increase your retirement income. I have invested less cash in real estate than in my 401k but my real estate equity is higher than the 401k balance. But that success is directly related to starting with a good plan. Plan the mission, then execute the plan.
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Happy Veteran’s Day from Excalibur Homes