MEASURE TWICE, CUT ONCE
This is ancient carpentry wisdom: measure twice, cut once. Essentially it means to double-check what you’re working on, before wasting time or materials. Interestingly, it applies equally to home building as it does to creating our financial freedom.
As it turns out, there are a lot of famous measuring quotes. For real estate investors, the number of doors, properties and rooms are often useless to measure –except maybe at the bank, or at a real estate conference. How we really measure success will be different for every investor. Profits? Net Operating Income? Cash on Cash returns? Monthly cashflow? Net worth?
Any of these metrics can be valid, and easily measured in a portfolio. Ah, but what do they mean to your financial freedom goals? And more importantly your WHY? Having a hundred doors is useless if an investor despises their lifestyle of property management chaos. Having $10 Million in Net Worth is counter-productive if there is no daily cashflow for life expenses.
Luckily this is a great time of year for measuring.
Looking back on 2023, how did we do with our businesses? Our key performance indicators? Our real estate investments? A simple review of the numbers might reveal one property that is doing very poorly. Is that a solveable problem, or a temporary issue? If not, a great double-check is to evaluate if that property fits with your life goals, your why and your financial freedom plans. Remembering that our real estate investments are each small businesses (they are not our babies or fur-babies), it can be a clear decision to remove the problem property from our portfolio. No big deal. No one gets it right 100% of the time. Moving on ….
Maybe a reflection on 2023’s real estate investments will reveal one property that sucked up a TON of time! I’m not sure who the first person was to create the expression “vampire properties,” but it’s a real thing. There can be valid reasons for this phenomenon, or a poor Return-on-Time can also be a rational reason to remove a property. Is there another solution? Different property management perhaps?
And sometimes “measure twice, cut once” is harder than it first appears. Maybe an outside opinion is our “double-check.” An outsider will have zero emotional investment in any house or door. Hopefully, that individual will be invested in your success and/or your happiness/quality of life. Paying a consultant or a coach to guide you through a portfolio review can provide tremendously valuable insights.
We have been chatting with a few people who are talking about “cutting” properties. But when we gently probe the reasons behind the decision, we realize they might not have “measured twice.” One person simply had an ineffective bookkeeper and had lost track of their monthly and quarterly numbers. Fair enough! Need to solve that problem first.
May we also suggest that a review of 2023’s actions and progress might also reveal that you knocked it out of the park! Consider where you were in January 2023? Are you astonished by the results in a mere 12 months? We are! Or maybe you changed strategies from being an active investor, to doing private lending as a more passive investor? Did that decision improve your life and your finances as intended, or better?
Measuring the financial numbers, time and even emotions (aka stress) that each property requires is a solid investment in our BIG picture. Regardless of the challenges that are revealed, there are still many possible solutions out there. “Cutting once” is simply one viable option.
Cheers to your success, financial freedom, and safe travels this holiday season!
