At the heart of every business, landlording included, is entrepreneurial planning. Every business has to plan for the future in order to grow and develop. We business owners have to plan to keep expenses from outpacing revenues and to keep all of the parts active and functioning. Otherwise things can go south very quickly.
This entrepreneurial planning involves asking questions and interpreting what markets are trying to tell us. Whether we realize it or not, everyday we are in business we are in the process of planning. We think about and try to determine what rental income will be, what real estate is selling for, what contractor labor will cost, what repairs can be done today or postponed, and on and on. In sum, we are doing our best to try and predict the future.
In the best of circumstances trying to predict the future is difficult enough. None of us has a working crystal ball and we can only make an educated guess. But, guess we must and guessing wrong can hold dire consequences. Not only might we loose money, we may loose our entire livelihood. Yet, we must try and hope that our education, experience and intuition carry the day. Today however, with the supression of the economy, it has become almost impossible to do what every business must do – plan.
With much of the world effectively shut down, the feedback that we would normally receive from our tenants, from contractors, from property sellers, from property buyers, from lenders and other investors is at best skewed and at worst gone. How can we, or any other business for that matter, plan for the future right now?
Because we cannot plan, there are ripples through the economy and society that can be difficult to see and discern, but are nonetheless very real and lasting. For example, someone’s plans to expand a property portfolio may be on hold, or major rehab jobs might be postponed meaning employees or contractors are never hired and materials are never purchased thus compounding the problem. Uncertainty rules the day right now for the business owner and it is translating into losses throughout our communities.
Should I buy that house to rehab and resell? Will there be any buyers when I am done with the rehab? What price will I be able to ask for? Should I tighten up my buying standards? Where are rental rates heading? What about vacancy rates? Will that property cash flow if rents drop or vacancy rates increase? Should I just wait it all out?
I just don’t know.
“I just don’t know” seems to be the answer to almost all plans right now and I fear that it will be more difficult to shift back to being able to plan than we realize. I know that we and our business have held back on some projects and spending until things become clearer. I do not think that I am alone.
What about you? How are you thinking abut the future of your real estate investing business right now?
Kevin Perk is the founder and publisher of Smarterlandlording.com. He is the author of Advice From Experience To New Real Estate Investors. Subscribe to Smarterlandlording here. Contact Kevin here.
