You may think you are a tight fisted miser because you aren’t playing the lottery or gambling away a lot of money in Vegas. You may not fall for those late night infomercials touting the latest get rich quick scheme in real estate or forex.
As a result, you may not view yourself as all that greedy. But there may be some instances of what seem like reasonable business decisions that in a quest for greater profits may actually be costing you money. Allow me to share with you two examples.
Pricing Rent at Below Market
I own a few rental houses which I plan on being able to provide a retirement income someday. When I was a new landlord, I read several books on the subject of investing in real estate and managing property. One of the best pieces of advice I read was to price the rent at the lower end of the market.
For example, if most houses are renting for $1000 per month in your area, price yours at $950. “But that means less profit to me!” Not really. There are several reasons why it will actually mean more profit.
1. Greater tenant selection: There will be many prospective tenants who see your ad and want to fill out an application. It is much easier to find a decent tenant if you have 20 from which to choose instead of just 2.
2. Quicker turn around: Assume it takes one week to find a tenant for your empty place at $950 versus one month at $1000. That 3 week difference equates to $750 in revenue. At an extra $50 per month, it takes 15 months to make that back. If the tenant moves after one year and you repeat the process, you just lost money, which leads to number 3….
3. Tenant Stability: Tenants are always looking for cheaper rent. If they can’t find it elsewhere, they have no reason to move and you will have little turnover with the costs associated with advertising a vacancy, making repairs, cleaning for the next tenant, etc. I have had several tenants in place for almost 5 years now so I can collect rent consistently month after month.
Making Money with a Blog
Here is another example from my personal experience. I run two blogs, Cash Flow Mantra and Grand Per Month and will be starting a third in April. I do all the writing for Cash Flow Mantra myself but would have no way of doing it for both. So, I have hired some writers to help with about half the content for Grand Per Month.
Even though it cost me money in January, I was able to make a profit with Grand Per Month in only the second month of its existence despite paying for some of the content. That is because of the help that I get managing my private advertising.
I had been using this service and paying a commission for Cash Flow Mantra realizing that I didn’t have the skills or the contacts to bring in any real ad revenue on my own. So rather than be greedy and balk at paying the commission, I figured that 75% of something was more than 100% of nothing. You see, greed could have cost me in the guise of making a business decision. But it didn’t and I have much more profit than I might otherwise.
Do you have examples from your own life that looking back were influenced by your desire for money which may have actually cost you in the end? Any instances where you should have sold that stock but didn’t because you wanted more? Feel free to share in the comments below.