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Managing Cost Challenges Investors | International Residential Real Estate Investors Association
Saturday September 23rd 2017

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Managing Cost Challenges Investors

Investors often fail because they can’t overcome the cost management challenge.  This recent article I prepared on Ezine Article Dives further into the subject.  If you have questions and or would like to achieve more, send me an email and I’ll help with specifics…blake@irreia.org

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Rental investments can quickly become overwhelmed by exploding expenses. The lawyers keep piling on all the things they should do. Accounting costs spiral out of control. Management companies begin feeing your properties to death. “Required” maintenance grows. Capital needs expand. Hire better staff for more money. And the list goes on and on. As investors and owners, we have to act decisively to control costs that inevitably creep upward on us. Managing costs for our rental properties is an ongoing challenge that as owner, investors, and operators must be grappled with and controlled or there is not profitability and no value in the effort. This article offers a number of steps you can take to manage these costs more effectively.

First, be organized. Develop ledgers and records of activities, costs, receipts, vendor information, supplier information, investor information, maintenance calls and solutions, and project information for your properties. This may sound oppressive, but is actually one of the simplest steps to complete. These ledgers mean that you won’t be digging through files trying to find information such as investor addresses, tax ids, capital contribution and date, founding date, etc. Your files (or even piles of papers) will be there when you have to find the obscure contract fact, the detail about and applicant, etc. Instead, open a ledger and there you are for 99% of information you need.

Second, there is much you can do yourself and taking the time to do so will save fees and expenses, will improve your knowledge of the business, and will improve your ability to operate. By having the information organized in ledgers you may be able to make all or most (and with some accounting coaching for an hour or two) you can enter all the transactions in your property accounting system. Get a copy of a good operating agreement. Read it. Edit it to suit your needs and intents. Let your lawyer review and fine tune the end product. Same thing for investor subscription agreements. As owner operators we are not helpless. Preparation saves cash. Need a pro forma or a model for your project. Prepare a thorough set of assumptions, review them with your financial accounting support, fine tune, and either take a shot at the item yourself or turn over assumptions that allow preparing documents in a fraction of the time.

By taking these steps, you will be able to minimize the use of lawyers, accountants, consultants, etc. You will bring more granular experience to your operation and until your operation develops the required scale you can minimize your costs. Further, by establishing these organizational disciplines, you will reduce the operating cost of your business for the long haul even if your business becomes quite large.

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  1. [New blog]: Managing Cost Challenges Investors http://bit.ly/9L39B8

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