As 2009 gets started I wanted to start the series on Financial Management for Real Estate Investors.

This is a critical piece of your success and it is what you need to build your foundation on.  If you are not operating with a sound Financial Management plan then it will be very difficult for you to be successful in growing your wealth with Real Estate.

The first key to your Financial Management is knowing what your current inflows and outflows are.  Once you know these numbers then it is time to determine if the inflow is covering the outflow.  Hopefully it is – but if not don’t bury your head in the sand – address it!!

If you determine that you have a short fall in what you bring in each month vs what you pay out each month this is something that you must take care of before you jump into your investing.

Taking care of this situation can be done by attacking both sides of the equation;

1) decrease what you pay out each month

2) increase what you bring in each month

Once you know within $10 – $25 dollars what you typically pay out each month and on what it is time to evaluate this spending.  Can you cut certain things out?  or decrease what you spend each month?  I know when we very first did this exercise we realized we were spending way too much on eating out – so we cut this down.

In going through this exercise here are a few things I would suggest you look at:

Cable TV — Can you get a special promotion from your provider?  or Can you cut out some channels?

Cell Phone – Evaluate your plan and make sure you need everything you are paying for

Utilities – If you aren’t on a budget billing plan I would suggest this.  This will allow you to pay a set amount each month and make it easier on budgeting

Groceries – This is an area that can often be tightened up.

Dining and Entertainment – This is an area to look at and see if you really need to spend what you do here

I hope the above gave you some ideas to look at.

Now on bringing in more income each month ……  this is something that you ultimately want to do as a Real Estate Investor and will do so, but sometimes you need to right the ship first and build a stronger financial base.

If you are really struggling each month and have a large shortfall I would strongly suggest that you look at getting a part time job until you can right the ship and get rid of the short fall.  This part time job may even be in the Real Estate area, maybe you work for another investor on an hourly basis, work in a Real Estate Office, or in an Appraisal office.  One thing that is in high demand right now are clean-outs of all of the foreclosed homes, maybe you do that for a while.  Remember this is a part time solution – not permenant.

Other things I would suggest in looking at your income is to make sure that you are withholding at the proper amount on your paycheck if you are working a full time w2 job at this time.

I hope this post gave you some thoughts to think about in terms of Financial Management.

Happy Investing
Stefanie Blackburn
Real Estate Success Link