Broke and Out of Work!

That got your attention, didn't it? Well, to tell the truth I am neither broke nor out of work. However, the headline does bring up the point I wanted to talk about - expanding your business. You may recall that I bought 12 rentals in May. That was a significant increase in my portfolio, which totals several dozen rentals. I have a full time rental property business, which means that I need my rental property business to generate income every month so that my family can eat, pay the house payment, go camping, etc. In other words, we depend on that money.

When you expand your business too rapidly, that eats away at your cash flow. That's what happened to me this month. During May and June, I spent a BUNCH of money rehabbing those 12 new rentals. I worked many long days and each day I made multiple trips to Lowes. It seems like I can't go to Lowes without spending at least $100, so all those trips really added up. To make matters worse, property taxes were due in July. That took many more thousands of dollars. On the bright side, my taxes weren't nearly as bad as another investor I know - $60,000. OUCH! When all was said and done, my cash flow was nearly gone for this month and therefore I'm basically out of work for the rest of the month. I have enough cash to deal with any maintenance that comes up, but I won't be doing much else until the beginning of August.

The point of this entire post is that you need to be careful as you expand. Being too aggressive can be just as bad as growing too slowly. Twelve new rentals in one month was just about my limit. In this case, fewer would have been even better!