Profits

The old story of the frog tossed into boiling water and immediately jumping out comes to mind. With climate change the warming is so gradual (and sometimes welcome) we don’t notice we are getting boiled. Yet the temperature inexorably continues to climb. Like the frog, we will stay in the stew until the meat pulls away from the bone.

Change can be good. And profitable! If only we have the will. Otherwise another kid with a cute message will get a good jab in on Congress thirty years from now when the problem is still unresolved and much worse.

Residential investment property is forgiving for the most part. Professional managers exist in most markets and except for the very worst of conditions it is possible to fill most apartments even if it is not at a profitable rate.

The number of residential properties available is large and unloading a single family home or duplex is fairly quick and simple. Many economists consider a six month supply of homes on the market a healthy balanced market.

Things get slightly less forgiving when you graduate to multi-unit apartment complexes. There are fewer to select from, they cost significantly more, there are more tenants to manage and it usually takes longer to sell the more expensive buildings. Not as many investors can swing a multi-million dollar deal or even finance one.

First, let me address how I structure delegation in my office. Delegation is more than just taking stuff on my desk and throwing it on somebody else’s. If you want work done right you need to delegate to the proper people. The best delegation keeps projects from your desk in the first place.

I will use tax returns as an example. When clients bring in their tax return the front desk scans all the paperwork and puts the return in one of three drawers marked: A, B, and C. “A” tax returns are easy and any preparer can do them. A limited review of these returns is conducted before distribution to the client. Advanced preparers (that means me and any high-paid employee) never touch these returns. “B” tax returns make up 60% of the work load. Advanced tax professionals handle these returns with review, except for me. Novice preparers (do I have any of these?) can data enter these returns, but an advanced preparer finishes the return. The “C” drawer contains the most complex tax returns and comprises 25-30% of clients. Anyone can data enter the material, but an advanced preparer finishes the return with a review by me. If I prepare the “C” type tax return, my work is also reviewed.

When it comes to passive income, real estate is king. A small investment can be leveraged into a massive cash cow. This is the second in a series of posts on lessons learned. Some lessons in life come from clients or from watching clients deal with issues. With investment properties I pull from personal experience. Over the years I have owned over 100 single family homes, numerous duplexes, a few multi-unit buildings, a storage facility, commercial property, and farm land. The lessons I have learned buying, selling, and leasing real estate over the last 28 years should provide a few nuggets of wisdom you have not read before. This added wisdom hopefully flows to your bottom line.

There is an interesting stream of questions hitting my mailbox. My recent suggestion to cut back and retire early has led to one interesting question. I recommended cutting back to a part-time seasonal job and enjoying all the free time. I used tax preparation as a business idea perfect to live the relaxed lifestyle. CPA’s and other tax professionals came out of the woodwork with the same question: How do you get clients?

Getting clients has always been the easy part for me; finding qualified people to help me with the abundance of clients is a different story. What I am sharing today is something I charge a minimum of $3,000 for a personalized plan to increase your clientele. For free I’ll share my business growth story and few example businesses to help you create your own growth plan.