The Property Unleashed Podcast

Maximizing Success in Property Investment: From Hands-On Landlord to Strategic Entrepreneur

• Mark Fitzgerald • Episode 300

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The episode focuses on treating property investing as a structured business rather than a casual endeavor, emphasizing the importance of understanding key financial metrics crucial for maximizing profitability. Mark Fitzgerald discusses the various levels of property engagement, the six essential numbers every investor should track, and the necessity for systemization in creating a successful property business.

• Importance of professionalism in property investing
• Understanding three levels of property engagement: landlord, investor, entrepreneur
• Six key numbers for successful property management
• Importance of knowing monthly profit and breakeven figures
• Calculating gross margin for financial insights
• Evaluating operating cash flow for business sustainability
• Assessing cost per acquisition for better marketing strategies
• Identifying profit leakages and optimizing expenses
• Emphasis on systemizing property businesses for efficiency 
• Encouragement to embrace numbers for long-term success

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Speaker 1:

How to get the best out of your property business. Hello and welcome to the Property Unleashed podcast with me, your host, mark Fitzgerald. It's great to have you joining me here, as usual. So if you've listened to episodes of the podcast before, you'll have always heard me say that you need to think of your property investing as a business. Now there's very, very good reason for that is because in the era that we're in now, we have to be savvy professional investors. We cannot just wing it. Well, we can, savvy professional investors. We cannot just wing it. Well, we can. But that is not the best way of doing things. You want to be structuring things as a business. You want to be basically treating everything as if you're going to sell it later on. What would an investor think of how I've set everything up Now? That can be quite tricky when you're starting out, and sometimes I do say don't worry too much about getting all your ducks in a row, as they say in the very beginning, because sometimes we just need to get started. That is the most important thing possible. But as you start to grow and as you start to build, start to look to systemize things, start to look to outsource things.

Speaker 1:

There's three fundamental levels when you get started in property. And the first level is landlord level, and that is normally the level where you're doing pretty much everything yourself. You're running around, you're doing all the viewings, you're even doing some of the minor maintenance things. Why? Because you're trying to save money, you're trying to cut costs and stuff. Then the next level is the investor level. Now, this is a level where you're stepping back. You're paying professionals to do the work that you aren't maybe very good or qualified to do yourself. I'm terrible at stuff like that. I make more of a mess than actually solve the problem. But that is the investor level. So the investor level is where you will have systems in place and where you will pay people to do the things that will get you maximum results. Ok, and free up your time to be able to go out there and do the things that you need to be doing in your business, ie doing deals. And then, of course, you have the entrepreneur level, and that is where you really systemized everything. You're able to do deals. You're able to leave people to do everything else. You've probably got some people working for you, got some staff there, and that is great.

Speaker 1:

Now the old school. Landlords, as we like to say, the people that actually we like to work with, we like to do deals through, are great, because normally they haven't systemized things. About as much systemization they put into their business is having a letting agent run and look after their properties for them, and a lot of the time they take their eye off the ball and they get themselves into a lot of problems, which is why our services or our offers or our deals could come in and be very, very enticing to these types of landlords that have had bad experiences in the past. We, of course, in the era of the professional property investor, want to be making sure that we, if nothing else, get ourselves to investor level, and a lot of people don't do that because they're trying to cut corners, they're trying to save money where they shouldn't be. I know this and I'm telling you this because I did a lot of this in the very beginning myself and you could say well, it's all right for you, mark, you can afford to pay people to do stuff. Yes, I can. I couldn't in the beginning. So we all, or most of us, start at landlord level, but the thing is there's fundamentally six key numbers that you always want to have an answer to, and they're very, very important and those numbers will really help you systemize your property business. They'll also help you to track things. They'll help you to know whether you're profitable or not.

Speaker 1:

Now there are a lot of property investors out there that, whilst on paper look like they're very successful they've got lots of properties they're not actually making any money. In fact, in some cases it's even worse than that and their property businesses are actually costing them money in the long run. So we get people that are doing serviced accommodation but have done bad deals. I get a lot of people coming to me for support after they've already gone out there, started to do bad deals to try and change things around, and we can help you with that. If you are experiencing that at the moment. In any strategy, whether it's HMOs or serviced accommodation if you've done some bad deals and you really are feel stuck and you're losing money, then we do have training and coaching and support to help people with that, because it's not easy.

Speaker 1:

I've done bad deals. Okay, so I haven't got a track record of every deal I've done has been the best deal ever, but I do think sometimes you've got to kiss a few frogs to get the right answers that you need, and that's what I've done. But I've managed to also salvage a lot of those deals as well, in fact, all of those deals. I've managed to turn around and make a profit on them through thinking outside of the box. But the six key numbers that you really want to know in your business is how much profit did you make last month? That is number one. A lot of people don't know that answer. Now, if you're just starting out and you haven't got any properties, make a note of these. Obviously you're not driving, running, walking or anything, and you can do or come back to this later on. But how much profit did you make last month wants to be something that you are aware of. Okay, you could look at it on a week by week basis, but I would say, look at it each and every month. How much profit have we made when you start getting deals, when you start controlling property?

Speaker 1:

The next one is what's breakeven for you in your property business? So ie, once you've paid all the utility bills, once you've paid for any gardening, any maintenance, you've also paid anybody that's managing the properties for you. Obviously, if it's a rent to rent business, then you want to be looking at your wage. Are you going to be taking a wage from this? I'm really working out what is your month-on-month cost for your marketing? Maybe letters that are going out there, maybe you're boosting some adverts, maybe you're using a tool or some software? Put everything in there, add it all up and work out exactly what you need to make each month to at least break even in your business, and a lot of people just don't know this answer. Break even in your business and a lot of people just don't know this answer. And the break even can be liberating when it comes to your property business, because if you know how much you need to be making to, if nothing else, pay yourself, pay everything, keep the lights turned on, keep the wheels turning, so to speak, then you know that everything else then is going to be profit, and that's an exciting place to profit and that's an exciting place to be, and that's something that we work on in my training and my coaching and everything to make sure that people know these numbers.

Speaker 1:

The next one is what's your gross margin? Okay, now, your gross margin is the difference between profits. So a lot of people will say I've got a rent to rent, I make a thousand pounds after I've paid the landlord, the bills and everything. So that's what my profit is. But that's not what your profit is, because A you've got wages to take, you've got systems, you've got time, you've got effort, you've got all sorts of different factors in that profit. It's not actually profit that you can just bank and keep. Sometimes you can, sometimes you can't, but you need to work out what the difference is. So what is your expenditures, what is your wages and everything? And then what is the difference between that and everything that you have to pay for a landlord? Or, if it's just a property deal, what is everything that's going out the door on your utilities, on your other costs, and then you will see a gross margin in the middle. Now the easiest way to work that out is to get a calculator, put 100 in it, divide it by total income and then times it by grossed profit.

Speaker 1:

Okay, so work out how much money you're actually making after all costs, after everything, including your property, business and from your properties, and that will give you a percentage. That percentage is very, very important. It's very important because you want to make that percentage as high as possible. Ok, if you've got a 50 percent gross margin, that's good. That's a great place to start. Anything lower than that, then you want to be trying to get it to 50 percent. Anything lower than that, then you want to be trying to get it to 50%.

Speaker 1:

The next number, number four, is what is your operating cash flow? Now you could look at that and say what is my operating cash flow so far this year? What is it costing me to have this property business running? What is it costing me in marketing, in wages, in systems and things? Have a look at your operating cash flow and how much do you need to have? Because when times are hard, it's great to know exactly what your operating cash flow, forgetting about costs of the property and everything. What does it take for you to actually run your business? Now, if all you do is have a few properties and you give those to an agency and everything, but you still have a bit of minor maintenance coming in and stuff like that, just try and track over a 12-month period what you've actually been spending so you can look at your operating cash flow, because if you can get within six to 12 months worth of operating cash flow in a pot. That's a nice place to be as well, because then if you have problems or you have bad tenants or something goes wrong with the property, you've got the operating cash flow to keep it all above water.

Speaker 1:

The next one, at number five, is cost per acquisition. Now, if you are getting out there and using search engines or you're using tools like property filter, property data, you're using AirDNA and all of those great things to get you those deals, then you want to be factoring all of that in so you may be sending out marketing letters, you may be sending out all these other brochures, business cards, networking. What is it costing you to get a deal Now that could be in a rent-to-rent basis. So if you're just starting this out, you're not going to know this yet, and that's fine. If you're just starting completely, you're not going. And initially for me, when I first started out, my cost per acquisition was very high. It was something like 600, 700 pounds per acquisition. I was spending that on marketing materials and everything to actually get the deals. But as I got a couple of deals, the work that I'd done brought that cost per acquisition right down to probably around about 8585, £95 per deal. So it's costing me about £95 to do a deal that potentially would make me £500 upwards. And that is a great, great place to be If you know your cost per acquisition as the numbers start to filter out and you might need to track this over 12 months to get a really good handle on it.

Speaker 1:

As I say at the very beginning, it's very difficult to do so. Just go out there and market, know what your budget is, stick to your budget, but make sure that your budget is true. It's a budget you can stick to. You can maybe sacrifice a few things to do a bit more marketing. Why? Because short-term pain will give you long-term gain. It's really, really important that we factor these things in, because you need to start tracking things like this and planning if you want to be successful, truly successful, truly into the 15% of property investors that actually track all of these things, know their numbers and in which case, then, when they're doing deals and when they're looking to do deals, they'll do the very best deals because they know exactly what their business is making, what their break-even is and whether or not it is a good fit for their business. So, whether you're buying properties, whether you're looking to do rent-to-rent deals and things, treat it as a business Profit and loss.

Speaker 1:

Some of you listening to this will have already had properties over 12 months. Go and get your accounts, get your yearly accounts and start looking at these numbers. Start putting these numbers into a spreadsheet and tracking them month on month, because you do not know if you have what is known as a leaky bucket. Now, all your profits after everything may be going into a bucket, but there may be a couple of holes in that bucket that you are unaware of. And one of the other ways to obviously save a bit of money and stuff is actually looking at your subscriptions. Look at all your subscriptions to things. Are you subscribed to something that isn't serving you just because it's a nice thing to have? If it is, cancel it. Put that into your marketing budget and your marketing is the place that's probably going to cost you the most money, and there's nothing wrong with that, because we've got to acquire, we've got to get acquisition, we've got to get hold of properties.

Speaker 1:

This is something that, once you've mastered, is a complete and utter game changer. A complete and utter game changer. And, as I say, this is something that we look at when people are doing the rent to rent business builder. But as you're starting out, you're not going to be focused on these. You're going to be focused on the right things, which is getting deals and doing a good job with those deals. But as you start to progress, you're going to start to be looking further into these numbers.

Speaker 1:

This is something I help business owners with outside of property. So if you're a plumber, electrician, if you have a business, this is something that I can help you with on there as well, because a lot of business owners don't even know these numbers, don't know how to track them, don't set up scorecards, don't set up their marketing in the right manner, don't know what their break-even is. And once you know these things, you know what you can spend on marketing. You know how much it's going to cost you per acquisition, how much it's going to cost you per lead. You can budget for that and you can get out there. Now is this an exact art? Is this going to be? Oh, it's going to be £85 every time, maybe, maybe not. Sometimes it might be cheaper, sometimes it might cost you a little bit more, but at least you've got a handle on it.

Speaker 1:

So, rather than sat there thinking well, I've just spent loads on marketing and I haven't got a deal yet. Think about the deals as they're going to come through. It is the long game. You have to be consistent and persistent. But game you have to be consistent and persistent. But getting one deal could pay you back all of your marketing in one monthly income from that property. So this is something to just give you a bit of food for thought. It's probably for a lot of people you're not there yet, and I get that, but it's something to be mindful of If you are there at the moment.

Speaker 1:

This is something to really really look at and, as I say, this is something that I always try and go through with my coaching clients. If I have a one-to-one coaching client, we normally in the first 12 months are starting to build their business. Whether that's in property or whether that's just a normal business, we normally look to build their business and then we start to systemize things as they start to grow. So in the first year we're normally just going through these things, we're aware of them and we're tracking them. In the second year we really start to implement those things as well and most of the time, once they've got a handle of that and they know exactly what they're doing. They can go on their merry way and I love that. I love the fact that people are getting educated in that. I got educated in all of this very, very early on and I've systemized and made it a part of my business ever since I would say a good three or four years now and it's really, really helped me in tracking the numbers and knowing what the costs are.

Speaker 1:

I'm not a numbers man, so you might be sat there now or walking or whatever you're doing and you might be saying, gee, I hate numbers, I'm not a numbers person. I'm not. I'm certainly not a numbers person, but I do find these numbers quite fascinating. And, as a business owner, when you get these numbers all in line and you start to see what you're actually making, what your actual profit is and your profit margins are in your business, it does become very, very exciting and it really will help you. So have a look at those.

Speaker 1:

Get your profit and loss. If you've got any accounts, have a little look at that. So sometimes when you get a profit and loss from your accountant, not everything in the accounts is where it should be. So your fixed costs sometimes they're a bit strange with the fixed costs and stuff like that. So sometimes you need to really go through the profit and loss and have a look and say is that a fixed cost or is that a variable cost cost to really start to dig deeper into the numbers when it comes to. You know, maybe you've got a car or you've got a van or something that you're using in your property investing business and you need another one. Is that a fixed cost? Well, it could be a variable cost because of course, if you're getting more vehicles and things like that, then obviously that price can go up. So it would be a fixed cost in the business, but again, it would be a fixed cost with growth. So you have to take things like that into account.

Speaker 1:

I'm not gonna bamboozle you here in this episode, this podcast. At the end of the day, this is just talking about things to make you aware of them. So I hope you've enjoyed this episode. If you have and you need any help with your property investing, then please feel free to come over to my website, thepropertyunleashedcom. We have free tools and resources. Easy for me to say we have free tools and resources there deal analyzers, ebooks, masterclasses and things. And if you're interested in any further coaching, you want to take yourself to the next level, whether that's in property investing or in your business then do check out my other website now which is easy enough because it's just my name which is markfititchgeraldcom.

Speaker 1:

If you're interested in any of those, listen, I'm always happy to have a 20, 30 minute Zoom call with you, have a little chat with you, see if there's any way in a way that we can assist you and help you in your property investing, in your business growth. And of course, it's a no obligations chat. If you are, then just reach out to us, give us an email, send me an email at mark at markfitchgeraldcom, or go to the website, just fill a form in and my team will get in contact with you. I hope you've enjoyed this episode. I hope this has made you think about a few things. Now. Don't be afraid of the numbers. Embrace the numbers. I've had to, and ever since I have, my businesses have gone from strength to strength. I thank you very much for joining me here and I look forward to you joining me in the next episode very soon. Take care and bye for now.