When it comes to scaling your real estate business, you must spend money to make more money. The amount of money needed to finance your scaling venture will depend on your plans, strategies, and goals. Scaling expenses you will consider financing include costs like purchasing new software that can manage your growth, staff to run non-related real estate tasks like accounting, or a new building to house your real estate business. With a little research and calculations, you can forecast your business expenses to help you reduce risk by investors and procure the necessary funds to cover those costs.
In this article, I will share strategies for acquiring funding to finance your scaling venture for your real estate business:
1. Yourself (Bootstrapping)
Perhaps you’ve been saving for a vacation and have some extra cash lying around. If you do, you can use it to finance your scaling venture. Alternatively, you can provide ancillary services, similar to a side-hustle, to increasing funding too. If you invest in yourself, give yourself a loan that you will pay back by a specified date.
2. Family, Relatives, and Friends
Mothers, fathers, uncles, aunties, brothers, sisters, spouses, grandparents, and friends can help you finance your scaling venture. Acquiring money from these sources can be easier if you have a good relationship with them. Regardless, you should paint a picture of your businesses’ growth potential when you pitch your scaling idea in order to reduce the perceived risk by the investor. You can communicate your growth potential by calculating your sales, expenses, and profits forecasts for the next 5 years along with a comprehensive scaling plan and a payback plan with interest.
A lender is like your business partner who can help you finance projects - like scaling your real estate business. To help you find the best option, research at least 3 lenders when you shop around for one. Give them your sales, expenses, and profits forecasts to show them your growth plan, the amount of profits you’ll incur, and the amount of time it will take to pay them back. If you’re prepared with reports like these, you’ll have more leverage to negotiate a lower interest rate for your loan. Typically, they’ll have set interest rates for these types of loans and create a payment plan, but that will vary per lender.
After evaluating your business for scaling and growth opportunities, the second step to scale your real estate business is to acquiring funding to finance your scaling venture. Getting the money is easier and reduce the perceived risk by the investor if you can paint a picture of your scaling plans and goals. You can construct this picture by calculating your sales, expenses, and profits forecasts along with your strategies to grow. Once you acquire funding, you can use it to enhance your infrastructure by purchasing technology and/or staff to help you manage work and scale your real estate business.