This is the second post in my series on “Financial Independence”. In my previous post, I shared that you first need to get clear about your numbers.
2. Get control – Make your money behave.
Proverbs 10:4 says, “He becometh poor that dealeth with a slack hand; but the hand of the diligent maketh rich.” Most of us live our lives in such a way that at least every month, money comes into our possession. We need to be intentional and plan as to how we allocate that money instead of just letting life and other things happen to it.
The advice I commonly give to a struggling real estate investor when I am helping them get control of their situation is to identify where their money is going. Look for where you are “bleeding” money. Where is it going that is not its best use or does not give the best return? Do you have unnecessary or frivolous expenses? Those things that are bleeding money need to be cauterized.
Here is an exercise we recently went through in my office. We know that there are large, recurring, annual or semi-annual expenses. We have thoughtfully put in place a plan for setting aside money every month into a “sinking fund” to prepare for those expected costs. That kind of deliberate, forward-looking management of your cash flow is essential to getting control and making sure your money is spent as planned and behaves accordingly. This will help to stop the bleeding on large bills when they come due.
I suggest you do a thorough cash-flow analysis regarding every existing rental property you have to determine if that property in and of itself justifies keeping it in your portfolio. Is it possible that you combined three or four properties together and have one of those properties that is losing money every year, but its losses are masked by the profits coming in from the others?
You first need to get clear on your numbers regarding each property and asset so you can then get control of your money.
