Play Time is Over!

We had a great time on vacation, but today it was time to get back to work. I installed a new water heater in the doublewide that I have been working on; fixed a couple of water leaks on the hot water side; called the electric company to see why they haven't installed the electric pole yet (ugh); and called the heating and cooling company to see why they hadn't installed the electric furnace and air conditioning yet (ugh). All in all, a busy day.

I also was reminded of a lesson that every new real estate investor should take to heart. As I was leaving the house to go pickup dinner, the garbage man was stopping at the end of our driveway to pickup our trash. I got out of my truck and went over to thank the garbage man for the many years of good service he had given us. I did this because I recently got an announcement from a larger waste company that they had bought his business and would therefore be taking over his routes. I congratulated him on the sale of his business and was surprised when he said that the sale of his business wasn't enough for him to even break even, but it had kept him from being forced to file bankruptcy! This is a man who provided outstanding service to his customers at a reasonable price, but still didn't make it.

So, how does this situation with the garbage man relate to real estate investors? The answer is that most small businesses fail in a relatively short period of time. Running a business is not only about providing a good product. In fact, beyond everything else, running a business is ALL ABOUT THE NUMBERS. If the numbers don't work, your business will fail. This is particularly true in the rental property business. The vast majority of newbies fail. They fail because they didn't understand a few key principles: operating expenses; cash flow; determining the maximum purchase price; and dealing with tenants.

Running a successful business is not easy and the vast majority don't succeed. Success requires knowledge; hard work; and persistence.