Prepare for unexpected slowdowns.
McMahon says she makes accurate cash flow projections by adhering to a strict budget and preparing for the unexpected. “I structure my budgets to account for any emergencies.†She also has a zero-balance low-interest business line of credit available if she needs it.
The Real Estate Investor: Marcel Umphery
It was the fall of 2002 at Morgan State University in Baltimore. Financial aid refund checks, the college student’s version of a lottery payday, had just been disbursed. All of Marcel Umphery’s friends bought Coogi gear and Prada shoes, purchased the latest PlayStation and Xbox games, or planned spring break vacations to Florida, Cancún, or some other sunny locale, but Umphery did not. Instead, he used his financial aid refund checks to invest in property.
“I learned about investing from a friend,†says Umphery, now 31. The friend, a fellow student at Morgan State, told him about tax sale certificates of property that become available if the property owner hasn’t paid his or her taxes. Umphery bought his first certificate–in effect paying the property taxes–for $850. “I sold [the property] 21 months later for $25,000,†he says. “I reinvested the profits to buy more certificates.†When the financial crisis hit in 2008, Umphery slid into a rough patch. Positioned to sell seven properties for $1 million, he lost $250,000 instead. However, the recession and the depressed housing market did not discourage him. “I toughed it out and focused on buying for much less than before, and the prospect of the homes appreciating in five to seven years,†he says. “I took advantage of the declining market.†Umphery now has real estate investments worth $450,000. Rental income from his five properties brings in $4,100 each month. “I allocate money from my monthly income for any repairs or vacancies, and I save what’s left over. I’m netting [more than] $1,000 a month.â€
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