00;00;06;16 - 00;00;31;21

Unknown

You're listening to the Profit First for Real Estate Investors podcast. This show is all about helping real estate investors and entrepreneurs bring clarity and structure to the financial side of their business. In these sole episodes, we focus on practical financial strategies that real estate investors and business owners can actually implement, whether it's profit, cashflow forecasting or mindset. The goal is simple to help you run your business with more confidence and less financial stress.

00;00;31;23 - 00;00;58;21

Unknown

Enjoy the episode Rehab budget. It's probably lying to you unless you know your actual versus planned that budget. And I know I hate the word budget, but if you're a fixing flipper, for the love of God, know the numbers. Know where exactly you're spending each and every dollar. And I just want to give you some very practical tips where if you are constantly going over budget, you don't know where all the money is going, that I want you to know exactly how to get back on track.

00;00;58;23 - 00;01;24;12

Unknown

I will say this is the number one silent killer, but it's not very silent. I mean, it kills people pretty loudly because if you're spending the money constantly and if you are growing, especially like if you started doing fixing flips or you're doing new construction and you're constantly going over budget, all it takes is you putting in five, $10,000 per deal on every deal where your money dwindles very quickly, down to nothing.

00;01;24;12 - 00;01;50;10

Unknown

I don't want that for you. I want you as a business owner and as a fixer, flipper or whatever you're in. If you constantly have to put money into the business, you need to be able to get that money out. That's why that actual versus planned budget is so important. There's a very easy way to know where you are at any point during a project to that a lot of people never look at unless they're introduced to it as a real estate investor, especially in the fix and flip side.

00;01;50;10 - 00;02;13;12

Unknown

And that is on your balance sheet inside of your financial statements, whether you use QuickBooks or another software, if you're just doing spreadsheets, if you have a balance sheet set up, you're going to have during the time that you have a project, you're going to have what's called on the balance sheet, a current asset. It's actually something you own until you sell it.

00;02;13;12 - 00;02;36;00

Unknown

So you're going to have that. It might be called other current assets in your books or whatnot, but I want you to have it set up like this. Okay. You're going to have in your, you know, inside of your software in QuickBooks or whatnot, you're going to have like a parent account. It might be other current assets. Let's just do oh for other then see for current then assets.

00;02;36;00 - 00;03;03;14

Unknown

So you have an other current assets account underneath there. You're going to I would spread it out for each project like 123 main. You know I would have a project there and then maybe 4 or 5 six main. But here's the difference for the rehab and the fixing flippers that really know their numbers and know what's actually happening versus what they planned.

00;03;03;19 - 00;03;30;20

Unknown

They'll have it inside their system. So when the money gets spent on a project, I would have at least two sub accounts. I would at least have the purchase price as a sub account. So you know, okay. How much did I pay for this property when I bought it? Then you could have another one just called Holding Costs, which could encapsulate everything from utilities to the interest expense to anything else while you're holding the rehab costs.

00;03;30;21 - 00;03;53;12

Unknown

Now, honestly, for my sake, I had a third one. I did have the rehab cost, so I wanted to know anytime we spent money on a project because as a real estate investor, this was very important to me, because if you have all these numbers, if you have 4 or 5, six main in your software and like maybe purchase price, let's just I'm going to make these numbers super simple because I don't want to do math super quick.

00;03;53;12 - 00;04;15;08

Unknown

So here let's just say you made you bought it for 100 K. You're a holding cost up to this point. Everything but the rehab costs. So maybe interest all that is 25 K and your construction so far. Let's just say you had to do 75 K. You're all into it in your software. This main one will show the total 200 K.

00;04;15;08 - 00;04;38;28

Unknown

So it's like okay I have 200,000 into that property. So it'll show you what I call the into number. What are we all into this property. Because if you do that on a weekly basis, let's just say your books are being updated on a weekly basis, which I would recommend, especially as a fixing flipper, if not daily. If you are, then you always know that, okay, this number here tells me a couple things.

00;04;38;28 - 00;04;55;17

Unknown

It tells me how much have we spent so far on this property from purchase price, holding cost, rehab costs? That's my number all in right now. But if I need to fire sale this property, let's just say something bad happens. Whether that's in my personal life or the market. And I need to sell this. Well, I need to sell for more than 200.

00;04;55;17 - 00;05;09;01

Unknown

Or if I put any of my own money into it. I know that in order to take it out, like, how much am I going to be able to take out if I need a fire sale? This if I just do it at 200 K? Was any of that my money that I put into this property? This is why it's so important.

00;05;09;01 - 00;05;30;12

Unknown

Because if you budgeted for, let's just say you budgeted for only 60,075 right here, you're going to know like that how much you're over. But there's also property management software's project management software's there's CRM, there's all this this stuff out there as well that can help you, but nothing is usually as accurate as the actual dollars that hit your bank account.

00;05;30;12 - 00;05;52;29

Unknown

So if you have a financial software system, because I'm not even trying to get you on a financial software system, the whole point of this is this video is for you to know, are you going over or not with your budgets that you have inside of here, especially for the projects that you have going on? But if you're constantly going over like this is supposed to be 60, but it says 75, well, guess what?

00;05;53;00 - 00;06;10;21

Unknown

If you do that enough times and you put 15 of your own money in there, then guess what? You know that every single thing that you've done up to this point is 15,000 over. You've had to put 15 in and 15 and 15. How many times can you do that? So that's where I want you as a business owner to know.

00;06;10;27 - 00;06;27;05

Unknown

I know where every dollar has been spent on this project. And I also know what I planned, and I also know how much of my own money I've put into this. Because if you don't track that, that is the number one thing that will take you down. You might have a pipeline of lots of deals. There was one guy, one time.

00;06;27;05 - 00;06;51;06

Unknown

He had 20 deals in his pipeline. 16 of them were on market to sell already, like eight out of those, six were under contract to sell. And within the next month, he had four projects that were still sitting in his pipeline that were actually being worked on. He said to me on a call, I might need to declare bankruptcy because all these other 16 are like eating my cash.

00;06;51;06 - 00;07;13;10

Unknown

And the four there are also eating my cash as well. Like, I put a lot into those 16 and until they sell and I pull cash out, I'm running on fumes right now. And how many times have I seen this? It doesn't matter if it's 20 properties or if it's two projects. If you constantly are running out of funds, this is a big area I would look for is how much have we really spent on this property?

00;07;13;11 - 00;07;28;23

Unknown

What are we all into it? The other thing I would look at is how much loan did you get? Did you get 200 K? Did you get 150? Then that's 50 of your own money inside of there. Not just what you went over here. You didn't get enough to cover the entire purchase price, repairs, holding costs, all of that.

00;07;28;24 - 00;07;46;22

Unknown

I don't want that for you. I want you to be able to see very clearly how much you spent. And if it starts to go over, then you're going to see, do I need to get funds from somewhere else? Do I have enough funds to finish this? Do I need a bridge loan, whatever it might be, in order to get out of that situation, I need you to have those numbers in front of you.

00;07;46;22 - 00;08;03;15

Unknown

Because then you can make decisions. You can make a decision that can. Usually what I see is it ends up saving businesses because if you can have the cash where you need it, when you need it, it helps you to build the business that you want, but you're just missing a couple of key areas that you might not know that you have access to.

00;08;03;20 - 00;08;22;15

Unknown

Thanks for spending time with me today. If this episode gave you clarity or a new perspective. Be sure to like, subscribe, and comment below if you're ready to apply what we talked about today with real guidance and accountability. Visit profitrei.com to schedule a free discovery. Call with us to create your path to financial clarity and freedom.