Categories
Blog

Should You Buy Real Estate During an Economic Downturn

Buy Real Estate

There are definitive advantages to buying real estate during an economic downturn. Whatever the cause of the downturn, it will eventually lead to an oversaturated housing market. An oversaturated market means that the price of real-estate will fall, which means that you can buy property cheaper than when the real estate market is on an upswing. However, there are always risks associated with buying real estate, and those risk increase during a recession. You need to understand your risk profile before deciding if investing in real estate during a downturn is a wise decision. We will discuss both the potential risks and benefits of real estate purchases when there is a market glut.

The pros of buying real estate during an economic downturn

  • The price—The price of real estate drops when it is a buyers market. An economic disaster for one person can be an economic boon for another, as long as you are a savvy investor who understands the market in your area.
  • Real estate is an excellent way to diversify your investments and create an income stream—real-estate can generate income while increasing in value. If you are interested in buying commercial or residential real estate to produce rental income, buying during an economic downturn that drops, prices can be a smart financial move.
  • Stability—Real estate reacts much more slowly to fluctuations in the market, adding stability to your investment portfolio. Though a significant economic downturn will hurt demand, interest rates remain near an all-time low. For most of the country, housing markets remain tight, meaning that real-estate is not prone to dramatic swings.

The cons of buying real estate during an economic downturn

  • Overextending yourself—Even if your job seems stable, there can be unexpected consequences during times of national or global economic uncertainty. Using your liquidity to invest in real-estate can leave you vulnerable if your financial situation changes unexpectedly. Whether you are purchasing a home to live in or rental property, real estate is a substantial investment that reduces your financial flexibility.
  • Competition with other bargain hunters—Real estate markets can heat up during a financial downturn due to investors turning their attention to real estate. Before you end up in a bidding war with another investor, know the pricing averages over the last several years for the area that you are considering. If the prices have been overinflated, a modest drop in prices does guarantee that the area can sustain the inflated prices over the long-term.
  • Buying without doing due diligence—You need to work with a professional realtor who understands the market in your area. Realtors only make money if you buy, so keep that in mind when interviewing one you hope to work with. Always have the property thoroughly inspected by a reputable and licensed home inspector. You may be buying a property to renovate and flip when the market hits the next upswing, or perhaps you are ready to buy a home. Whatever your motivation, a missed problem with the property can spoil what seemed to be R great deal. From unseen water damage to foundation problems, many investors have had their investment sour when expensive to fix issues that are found after closing on the property. Even with a competent inspector, there are some problems that are impossible to see until you start the renovation, so if you are buying property to do a complete renovation, be prepared for unexpected costs.

Goals and personal finances matter more than the market when buying real estate

Whether you are buying a home or an investment property, you can always find great deals in almost any market. Instead of timing the real estate market, it is much smarter to time your investment to your own financial preparedness. If you have a healthy emergency fund, and a significant amount saved for a down payment, then you need to decide if you want a move-in ready home, needs minor cosmetic repairs, or if you feel confident enough to take on a significant remodel.  Whatever your goals, one of the most important things to look for is a home priced well with motivated sellers. There is no foolproof way to determine if a seller is motivated to negotiate a great price, but there are some flags that might indicate the seller would entertain a substantially lower price.

  • Look for properties that have been on the market for at least a couple of months. If it is because the price is above market value, you should probably move on. However, if it because the home has excellent bones, but ugly paint or unattractive carpeting, those are easy fixes, and the seller may be motivated because they have had few showings and no interest.
  • Pay attention to houses that are completely empty, indicating the seller has moved on and maybe carrying two mortgages. They might be anxious to shed the extra mortgage and motivated to sell.
  • Ask your real estate agent about highly motivated sellers they are working with, and check out those properties. There are numerous reasons sellers might need to sell quickly, and some of the best deals on the market are found when sellers need to sell fast.

 

Categories
Blog

How to Scale Your Successful Small Business

Small Business

You did it. You created a unique product or service and found the proper niche to market and sell. You built a small business from the ground up, and now you are ready to take it to the next level. While the potential to scale your small business is vast, you must be aware of the risks involved. Read on to learn tips for successfully scaling your small business and how you can avoid potential pitfalls.

 

Make a Plan

When you scale a small business through increased scales, you also scale your responsibilities. Before you take on more sales, you need to ask yourself if you have the people and systems to handle such an increase. If not, you need to put those systems into place before you make promises you cannot keep. Take the time to plan how you will handle the extra work, so you aren’t overwhelmed.

 

Consider Current Structures and Expand When Needed

Will you need a new facility? Will you need to hire more employees? Do you have an accountant to do your bookkeeping? These are all questions you need to ask yourself before you take the plunge and expand your business. Evaluate your current systems and determine what new strategies you will need to develop to handle an increase in sales. If you plan on having a hands-on role in the day to day work of the business, consider delegating bookkeeping and marketing to a third party or hire someone to do them in house. It’s better to invest the money you are getting from increased sales into stable systems rather than trying to take on all of the work yourself.

 

Find Money

Truly scaling a business is a hefty investment. Your growth plan may involve hiring more staff, investing in more robust marketing, etc. which all require money upfront.

 

Crowd Funding

Consider launching a crowdfunding campaign to secure investments if you have a pool of satisfied past customers who are passionate about the products or services you offer. To do this, you must have a clear idea of where you want your business to go and show past customers how investing in your growth will ultimately benefit them.

 

Bank Loans

Many banks will loan money to small businesses, and with interest rates at a record low, more small businesses are looking into this option. However, bank loans require a lot of paperwork upfront as well as access to past bookkeeping that shows your business can pay back the loan. Consider using the MoneyBin app to track your business expenses, so you have an accurate idea when applying for a loan. Also, banks will only consider loans for businesses that have been in business for at least two years, so consider this before applying.

 

Joint Venture

A joint venture is two or more businesses working together to secure profit through their combined efforts. The two enterprises create a third legal entity known as the joint venture and write an agreement about how both parties will benefit from the partnership.

 

Joint ventures work best when two businesses in the same industry who are not competitors work together. For example, a pool cleaning company could joint venture with a landscaping company as they both are in the luxury residential home industry but would not be competing against one another for business. A pool cleaning company may have a great lead generation program while the landscaping company has the money to fund the marketing campaign. The two companies can work together to grow their separate businesses by combining their efforts.

 

Invest in a Business Advisor

There is only so much information you can obtain from reading articles and doing research on your own. Eventually, you need advice tailored to your niche and your business from experts who have done what you are trying to do. While good business advice is not cheap, the information gained from speaking to an expert is invaluable. An expert can help you set reasonable goals and help you lay out a plan to achieve those goals. An expert can tell you when your plans are not realistic and stop you from setting yourself up to fail. If you haven’t scaled a business before, there are common pitfalls an advisor can point out to you before you embark on your journey.

 

If you have a successful small business and are looking to grow, you must be aware of the amount of work and the increase in responsibilities that come with expansion. Make sure you implement new systems to handle the growth of your business, determine how you are going to secure financing, whether through a conventional bank loan or a creative joint venture, and finally, invest in a business advisor to help tailor a plan. With proper preparations and a focused approach, the sky is the limit when it comes to scaling your small business.

 

 

 

Categories
Blog

Most Small Businesses Fail—5 Tips to Stop it From Happening to You

Small Businesses

If you have ever thought about starting a small business, you have probably encountered the frightening statistic that close to eighty percent of all small businesses fail in the first five years. Those statistics sound discouraging, and there is no doubt that many small business do fail. However, some small businesses close because the owner has accomplished what they wanted to do and moved on to another goal, but “failed” is defined by the business closing. Potential entrepreneurs often decide against opening a small business out of fear of becoming another statistic. There are numerous reasons small businesses fail, but there are steps you can take to make sure it doesn’t happen to you.

Five tips to avoid small business failure

  1. Identify your market—You might have a great business idea, but if you do not know your market, then your odds of failure go up. Too often, new business owners either attempt to start in a market that is already saturated with similar businesses or there business idea doesn’t fit the market of the area. If you want to start an entertainment enterprise that caters to young families and teens, but the demographic of your area is primarily retired people, you have little chance of success.

  Take the time to do an in-depth market analysis and research before you proceed with your business idea. Not only will this help launch your business more successfully, but the data you gather will also help you grow and expand your business in the future.

  1. Develop a written business plan—Many people think they only need a written business plan if they are seeking traditional financing for their small business. This could not be further from the truth. At a minimum, your business plan should list your specific objectives, strategies for success, how you plan to market your business, and the amount of money you need to start. Your business plan is the roadmap for your business, and should be frequently updated as your business changes and adapts over time.
  2. Seek advice from others who have started similar businesses—Having an advisor can give you insight into things you haven’t considered for your business. They can often offer tips and tricks to help you avoid costly mistakes. Even if your contact is someone whose company failed, they can share valuable information about what not to do.
  3. Maintain flexibility—Adapting to change and finding out what works and what doesn’t is a crucial part of running a successful small business. Many small businesses fail because they were unable or unwilling to change their business model to accommodate an ever-changing marketplace. One thing you can count on is that no matter how successful your business is in the beginning, you will have to adapt to changes as they come.
  4. Take a course in business finance or management. You can often find these types of courses offered through the Small Business Association in your area, or as continuing education classes in a local community college. The more you learn about managing the revenue generated by your business, the fewer costly mistakes you will make. These mistakes are often the death knell for small businesses, so taking advantage of inexpensive courses that can help you avoid them is an intelligent move for first-time business owners.

Common causes of small business failure

Unsurprisingly, the most common cause of failure for a small business is running out of working capital. Business owners know how much revenue their business is generating, but they fail to plan for unforeseen expenses and tap out all their sources’ of money. Though it is smart to reinvest revenue back into your business, you need to maintain some liquidity to deal with unexpected expenses that arise in every business. Ineffective or insufficient marketing is another reason that many small businesses fail. Marketing can be an expensive endeavor, and many small business owners do not understand how to track conversion rates to tell what marketing techniques are having the most significant impact. You need a marketing plan that is constantly updated to keep a steady stream of new customers, as well as to stay in touch with your established customers. Overall, the mismanagement of the business is the primary cause of failure for small businesses. To ensure the success of your business, make sure you are keeping abreast of changes in your industry and changes in the marketplace. Seek help early, and often, when you encounter problems. Reaching out to a place like the Small Business Association or a mentor can help you manage your business effectively. Remember, what the statistics can’t tell you is the overwhelming feeling of pride you will have in running your business well.

Categories
Blog

How to Build Wealth and Make Fast Money the Right Way

Money

When you are serious about building wealth, the most important thing is understanding that you have to play the long-game. There are legitimate ways to make fast money, but real wealth is something you amass over time. Building wealth starts with evaluating how you think about money.

Everyone wants to make fast money, but they often fail to realize that there are few shortcuts. Dedication, financial knowledge, and commitment to your goals are crucial to make money and use that money to continue building wealth. Wealth also has different meanings for different people.

In making a long-term financial plan, you have to craft your own definition of wealth. Do you see wealth as a large house in the best neighborhood, fancy sports cars, and exotic vacations? Or, does wealth mean the financial freedom of not worrying about debt? Your definition of wealth will be the foundation of your wealth-building strategy.

How to build wealth

Once you have determined your definition of wealth, it is time to create a sound financial strategy and stick to it. It is equally important to understand what wealth is not. Wealth is not purchasing things you cannot afford and drowning in debt. Debt is the antithesis of wealth, and the sooner you learn that lesson, the faster you will be able to keep the money you make.

The following are critical steps to building wealth, no matter how lofty or modest your goals.

  • Understand the power of compounding interest. The earlier in your life, you develop the practice of saving and investing, the longer compounding interest can work to build your wealth.
  • Always take advantage of free money and tax savings. If you work for a company that matches your investment into a 401k, invest at least the maximum percent that will be matched. The company match is free money, and you want to take advantage of every cent available.
  • Slash your living expenses wherever possible, and use that savings to reduce debt. That might not sound like glamorous advice for building wealth, but remember, debt destroys wealth. Take a hard look at your budget and determine both large and small ways you can save money. When you tackle debt, always start with high-interest debt first. The faster you can get out of debt, the quicker you can begin to build wealth.
  • Invest in education and skills. Though statistics prove that a college degree will pay for itself many times over, throughout a lifetime, your education should never stop with a diploma. Develop the mindset of being a life long learner and continually cultivate new skills. Each new ability makes you more valuable, and even if you can’t see it right now, you never know what door in the future it might open. Remember, learning does not have to be in a formal setting and doesn’t have to costs money. Podcasts, video courses, and books can all be free or inexpensive.

How to make money fast

We have established that wealth-building means holding on to as much of your money as possible by eliminating debt and increasing savings. Whatever your current income, you can start building wealth. However, increasing your income is also vital to building wealth. The following suggestions allow you to start making money the right way.

  • No matter what your job, whether you are an executive making six figures or working in retail for close to minimum wage, do your best every day. Many people have amassed fortunes in an industry where they started at the bottom and worked their way up. Even if your job is only a temporary stepping stone, building a good work ethic is crucial to success.
  • Become an entrepreneur. Take an inventory of your skills and passions and then find a way to turn those into a money-making opportunity. If you love photography, use the power of social media to launch your own business taking photos for friends and families. Use that money to buy better equipment if you need it, and continue to advertise your work. If you have a flair for writing, check out online platforms that pay writers. What starts as a side gig might open doors that lead to an entirely new career, but even if it remains a side gig, you are adding to your money bin and building wealth.
  • You have probably heard this advice ad nauseum, but networking is crucial to making money and building wealth. Establish and maintain relationships with people across various industries and walks of life, because you never know when that relationship might be the key to your next great opportunity.

 

Categories
Blog

Building Your “Moneybin”—When to Save and When to Invest

Moneybin

Learning how to save money is the first step to financial success. Whatever your long term financial goals are, saving and investing your money will be critical to achieving the wealth you want. Wherever you are on your journey, the first step to building wealth is determining where your money goes. There are numerous ways to track spending so that you can understand exactly where your money goes every month.

Ways to track your spending:

  • You can go low tech and carry a small notebook or use the notes option on your phone. Just jot down the date and then record everything you spend. Many who use this method then record everything onto an Excel spreadsheet when they have time. Though this method works if you are diligent, there are easier options available.
  • Moneybin is an app that makes recording every expenditure easy and convenient. It then sorts the spending into categories and lets you see how much you have spent on a particular category, like food, in a week, month, or year.
  • Skrooge has an app and a desktop version that provides all the tools you will need for expense tracking and personal finance management.

After you track your spending for a month, you should be able to identify ways to slash spending to build up your savings. Savings is a cornerstone of wealth-building because having money in savings will help you cope with the unexpected expenses that always occur in life without turning to credit. Most financial experts recommend that you have at least three months worth of living expenses in an easy to access savings account. That is your first goal in building wealth.

The difference between saving and investing

Saving money usually involves putting money into a low-interest savings account at your bank or credit union that pays a low-interest rate. You will not earn much on this money, but it is kept safe and accessible. Once you have your emergency fund in savings, it is time to start thinking about investing.

Investing money means putting it into stocks, bonds, or mutual funds that are a combination of the two. You can also invest in tangible assets such as real estate or precious metals. Investing is the best way to grow wealth, but there is always some level of risk involved. When saving for long-term goals, such as retirement, your money has plenty of time to ride the highs and lows of the stock market and make money for you over time.

Once you have established your emergency fund, you should work to reduce debts and spending until you can save at least 20% of your net income each month. When you can do that, you should consider splitting it between savings and investments. Savings above your emergency fund can be used for large purchases in the future, such as a vehicle or the downpayment on a home.

Always take advantage of free money

Many companies now offer some form of a 401k to their employees. This is a retirement plan where the employer matches your retirement savings up to a certain percentage. Always invest at least enough to take advantage of the full amount your company will match. Over time, a 401k that is fully vested can grow into a significant sum of money. When you change jobs,  you can roll your 401k into a new retirement account, where it can continue to earn compounding interest.

The power of compounding interest is too often overlooked by those who can benefit the most from it. Those who are still early into their years in the workforce can amass substantial wealth by taking advantage of employer-sponsored savings plans as long as you continue to invest and let the money continue to earn money for you until you reach retirement age.

Starting a modest investment portfolio as soon as possible helps you build wealth while learning about the smartest ways to invest your money. It is easier than ever to invest with many investment companies offering low or no minimum balance to start your investment account. The learning tools on these sites can help you set financial goals and guide your investment choices to meet those goals best.

Categories
Blog

Avoiding Business Disaster—Learning from Disney During the Pandemic

Business
Like the rest of the world, Disney is navigating unchartered territory in the COVID-19 pandemic. As a global business whose theme parks posed an insurmountable obstacle to social distancing, Disney had little choice but to close its parks until it is deemed safe to resume operations. Disney employs a massive number of people in its theme parks around the globe, so closing the gates had a substantial impact on employees and local economies around each park.

What did Disney do right to avoid a business disaster?

Many large businesses should have taken a lesson out of Disney’s playbook when it came to handling the pandemic, especially in how Disney treated its employees. Disney continued to pay many of their staff members through April 18th, more than a month after the parks had closed.

In Florida, when Disney was forced to furlough its employees, the company took the initiative to file unemployment claims on behalf of its workers. For those who have followed the news about the frustrating process of attempting to file unemployment claims in the current climate, you realize what an advantage this was to Disney employees who did not have to spend endless hours trying to fight an overburdened system.

Managers and leaders have kept in contact with most of their staff throughout the pandemic, making sure everyone is doing okay. Given that Disney employs over forty thousand employees in Florida alone, that is a substantial undertaking.

One of the most essential steps Disney took was closing its parks ahead of government mandates that they do so. Some places, like Florida, were slow to roll out any type of social distancing or stay at home orders. In areas like that, Disney could have continued to operate for some time. In a business where each day brings in millions of dollars in revenue, closing early showed a sense of responsibility to staff and visitors.

Other venues and parks could learn from Disney in how quickly and effectively, Disney made changes to accommodate the potential health crisis. Disney made the health and safety of its guest a priority by increasing cleaning and sanitizing measures in the parks, providing hand sanitizing stations throughout the parks. The impressive thing is that they implemented these measures quickly during the very early days of the coronavirus.

Efforts like those named above are what keep Disney employees loyal to the company, and helps maintain a stellar public image.  Though Disney had no option to closing its theme parks and they did more than most large companies to help their employees, Disney also made some moves that could prove disastrous.

Business mistakes Disney made

Though overall Disney did a decent job in protecting customers, and in looking after its employees, there are mistakes in how they handled such an unprecedented event.

  • Disney had to know that the closure would be indefinite in the early days of the pandemic, but they initially stated they would be closed until the end of March. They waited until the end of March to announce the indefinite closure of the parks. This time in limbo made things more complicated than necessary for the tens of thousands of employees, as well as frustrating for vacationers who waited to cancel their vacation plans in hopes that Disney would reopen by early May.
  • Disney announced its closure several days in advance without taking any steps to restrict crowds on the final days. People packed into the park, shoulder to shoulder, to try to get in the last visit before the parks closed. Given that they were closing due to a public health emergency, not limiting crowds seemed a bit irresponsible.
  • No one can predict the length of the pandemic, and no one expects Disney to have a crystal ball, but they could release more information to both future guests and staff about how they plan to reopen and even an estimated timeline.

 

The total lack of information from Disney about future plans is frustrating for both employees and guests who are eagerly awaiting any news from the Happiest Place on Earth. The lack of information has depleted some of the goodwill Disney built by its responsible handling of the initial shutdown. Given that Disney has already opened its Disney Springs shopping center, there must be at least the outline of a plan for reopening. Both guests and employees would appreciate feeling like Disney was making some effort to keep them in the loop about future plans.

  • It remains to be seen what steps Disney will take to protect its guest once the parks do reopen. Most people predict that the parks will reopen in stages, but one has to wonder if guests will be willing to pay for a less than full Disney experience.
  • The great unknown could prove to be a disaster for Disney. Will people feel safe returning to a crowded theme park in the foreseeable future? If Disney reopens with a modified maximum capacity, will enough people buy tickets? Employees are concerned about the unknowns they are facing. They realize their jobs at Disney could be at risk if Disney is forced into a permanent or semi-permanent reduction in its workforce.