5 Things You Should Do With Your First Big Closing CheckBy JD Esajian on February 8, 2017
There is a certain euphoric feeling closing your first big real estate deal. You most likely thought about this moment for weeks, if not months, planning where you will spend your windfall. Before you get too excited it is important to consider the big picture. Any check you receive at closing is not 100% profit. You need to account for any debts you accumulated along the way. You also need to think about when your next closing may be coming and how you can stretch your dollar. This doesn’t mean you can’t give yourself a little treat but closing a deal doesn’t mean you hit the lottery. If you are not careful with your money you will quickly wonder where it all went. Here are five things you should do with your first big closing.
- Pay Down/Off Debt. Before you can look forward you need to consider what you just went through. As we mentioned you most likely accumulated some debt on your way to closing. When you receive your closing funds it is easy to overlook this debt and not give it much thought. However not paying down debt can quickly derail any successful business. The first think you should do with you closing funds is pay off your accumulated debt. Paying it down is ok but paying it off is even better. When all is said and done you may not be left with much capital to work with but consider the alternative. Increased debt limits you on deals moving forward. You will have to earn twice as much just to break even. Your monthly obligations will begin to creep up and you pretty soon they will match or exceed your income. Paying off debt is boring but it is the best way to sustain your business growth.
- Lead Generation. The goal of any business is to keep a steady flow of income. In the real estate world you need to constantly focus on keeping your pipeline full. If you are not generating new leads it will be a long time between closings. Spending money on lead generation doesn’t mean you have to break the bank. Allocate a certain amount of funds from the closing towards something that works for you. Items such as social media advertising, bandit signs, local publications and team sponsorships are a great low cost way to add to your advertising pool. You don’t have to do everything at once but you should find something that works for you. Even if you do something small but save some funds for a future direct mail campaign that is beneficial as well. It is not enough to simply hope and wait for deals to fall on your lap. You need to take a proactive approach and go out and get them.
- Education. The best investment you can make from a closing is an investment on yourself. If you have been putting off taking a class or obtaining a license you should use the closing funds to do so. A real estate license is certainly not necessary but it can help open doors and find new deals. One of the biggest reasons that investors don’t get licensed is the cost. Not only do you need to spend money on the initial course but there are costs for books, testing fees and the real estate license itself. All told it could cost close to $1,000 to become a real estate agent. You can also choose to spend money on education. This education can come from audio books, printed materials and teaching seminars. It is clichéd but you can’t put a price on education. Knowing how to talk to homeowners or structure certain deals can give you a decided leg up on your competition.
- Team Building. You most likely wear many hats when you are just starting out. It comes with the territory that you take on multiple roles and have your hand in every aspect of your business. However just because you can do something doesn’t necessarily mean that you should. If there is residual income from a closing you should consider hiring people that will make your business more efficient. Hiring can be as small as taking on an administrative assistant for eight hours a week or finding someone to help with mail and email for a few hours. It can mean outsourcing cutting the grass on a rental property or finding a copywriter to help with your blog. Doing this doesn’t make you lazy and isn’t a waste of money. Anything that can help free up time so you can find deals is a good use of closing funds.
- Save It. Making money on a closing doesn’t mean you have to spend it. If there is nothing pressing in your business it is ok to save the funds for the future. Think about what is really important for your business. Items like technology and website development are acceptable items to spend money on. Things like furniture for your office or new car lease don’t have much long term value. There is nothing wrong with adding to your rainy day fund. The odds are that you will need reserves in a pinch at some point down the road. Don’t blow your money on impulse purchases. If you can’t find anything useful to spend it on it is ok to save your money.
It is not how much you make but what you do with it. After a closing is when you need to stay composed and put your money to good use,