Today we find thousands of people worldwide buying a franchise. There are many great franchises; most tier one franchises require you to be a millionaire or a multi-millionaire before you can join the select club of franchise owners.
Recently in his blog post; “Popular Food Franchises and How Much They Cost” wrote about the most popular food franchises and the cost of entry. https://www.thebalancesmb.com/most-popular-food-franchises-and-how-much-they-cost-1350254
The top ten franchises Don mentions in his blog have a price of admission between $116,000 to $2,000, 000.
Many franchisees who purchase second-tier franchises will tell you they end up buying a job. These franchises don’t require you to be a millionaire, but they are still a substantial investment.
Being an advocate of entrepreneurship and owning a small business; I would not deny anyone living your dream through franchising if you have done your due diligence and feel comfortable with your decision.
Making the Most of Your Initial Investment
Is there a better way to be an entrepreneur? Buying a franchise takes away much of your control because you need to operate within the franchising system.
Open a Different Door
Think about taking the funds you would invest into a franchise and secure investment real estate with the funds instead. The funds you spend to purchase a franchise can easily be your down payment funds you use to secure an investment real estate property.
When buying your first investment real estate property, I can suggest several different approaches; in this example, I am going to discuss using a conventional mortgage; a conventional mortgage requires you to have a down payment of at least 20% of the home’s purchase price readily available.
With a down payment of 20%; this helps to lower your mortgage payments creating a situation where you cover all costs and turn a tidy profit.
The amount of time you need to invest in operating this small investment real estate business is limited to finding a good tenant and collecting the rent cheque.
There may be from time to time some maintenance required; you can hire these tasks to professionals.
KISS, (Keep It Spectularly Simple) Investment Real Estate Financial Operating Process
The complexity of operating most businesses is never easy; this has much to do with the cost of goods and the cost of operation.
The great thing about investment real estate you don’t have a cost of goods line; all your expenses are in the operating line.
Your inventory is your piece of investment real estate and any costs to keep your property current and desirable to rent show up in your operation’s line of the income statement.
Income Statement Made Easy – Investment Real Estate
When I coach my clients in what their income statement looks like I provide them with an income statement workbook; this workbook composed of the 12 months tabs and a year to date summary tab. This income workbook is excellent because you get your monthly financial report card and a self-calculating year to date number.
The Income Statement I provided my clients divided into five main areas:
- Revenue: (Rent, Damage Deposit, Refund, Pet Rent) Total Revenue Line
- Operational Expenses: (Bank Charge, Electricity, Gas, Water, Auto, Property Taxes, Condo Fees; if applicable, Insurance, Property Management, Legal and Accounting Fees, Repairs and Maintenance, Supplies, Renovations, Advertising, Telephone, Cable, Internet, Sales Taxes
- Less Total Operational Expenses
- Less Mortgage Principal and Interest
- Revenue Net Income Total (Total revenue line less total operating expenses less mortgage principal and interest)
When creating your net income statement; I recommend you do this the moment you know all costs processed against your monthly bank statement usually within a day of the month end. (With the ease of putting the monthly income statement together; there should be no reason to hire a bookkeeper; just an accountant at to produce your year-end statement)
You will love the simplicity of investment real estate financial tracking; you can generate your month-end income, expenses and net revenue statement in about 10 to 15 minutes maximum. There is no guessing; you either have positive or negative net income.
Are you ready to?