This isn’t really how our cash flow chart looks, but it’s close. Operational reserves are a big part of keeping your business going through the “prolonged droughts.” There are many months where our expenses are larger than our income, but oh those other months!

January was a record month for Hermit Haus. We closed on the sale of three houses, and one of our FortuneBuilder friends also closed on the sale of a house I helped finance. This business is really like the weather in Central Texas: prolonged droughts interrupted by floods. The droughts are periods of negative cash flow, and the floods are when you make the money to keep going. JD Esajian, who runs the CT Homes redevelopment business, once told me that if your house doesn’t sell, buy another one.

This isn’t a business for the timid or those who are risk-averse. You have to take risks to make money. As I’ve said before, the redevelopment business, unless you’re buying and selling multiple houses every month, is built on negative cash flow. You have to plan for it and have contingency plans for when your regular plans don’t come to fruition. Like when closing sales are deferred to the next month or even the one after.

By closing on the sale of three houses in January, we brought a lot of money into the company. Some of my friends might think it’s now time to trade in the old Jag for a new one. That’s not how business works. Here’s what we’re doing with all that money.

• We paid off all debts associated with the properties we sold, and we paid back our principles who kept us going through the long drought since the last sale closing.
• We’re putting most of the rest of the money in the bank to cover the cost of continuing operations. Remember the “prolonged droughts.”
• We’ve put some of it aside to buy more houses. We’re not stopping. We have a business to run and good left to do in the world.
• We’re taking a small distribution. After all, we need to get paid, too.

That last point is important. When Robert Kiyosaki says, “Pay yourself first,” he’s not talking about money to fly to the Bahamas. He’s talking about buying another real asset, something that will put more money in your pocket over the long run.

That’s what we’re doing now. And, truthfully, we’ve been doing it all along. We’re actively looking for the next project. We only have one more renovation in the pipeline right now. We need more.

If you know of anyone with a house they need to sell, please have them call us or visit Hermits Buy Houses. We’d love to help them out with a win-win.