608: The “Golden Trio” Every Real Estate Investor MUST Have to Truly Profit First w/David Richter

May 12, 2022

David Richter, author of "Profit First for Real Estate Investing," shares his passion for empowering real estate investors to boost their profits. He discusses the revolutionary Profit First system and its application to real estate, unveiling the 'Golden Trio' of bank accounts essential for financial health: profit, owner's compensation, and owner's tax. Through personal anecdotes, David emphasizes the importance of financial clarity and the need to shift from a 'do more to make more' mindset to efficient fund management, helping investors work less and profit more.

01:08:59

forum

Ask episode

web_stories

AI Snips

view_agenda

Chapters

menu_book

Books

auto_awesome

Transcript

info_circle

Episode notes

question_answer

ANECDOTE

David's Real Estate Journey

David Richter's real estate journey began in 2012, inspired by "Rich Dad Poor Dad".
He worked with various investing companies, witnessing high deal volume but often low profitability.

insights

INSIGHT

Deals Don't Equal Profit

High deal volume doesn't guarantee profit; some investors doing 25-30 deals monthly lost money.
Many investors, even those earning millions, struggle with profitability and financial management.

volunteer_activism

ADVICE

Separate Bank Accounts

Create good financial habits early, especially separating funds into multiple bank accounts.
Avoid using one bank account for all business transactions to maintain better control and clarity.

Get the Snipd Podcast app to discover more snips from this episode

Furnishing a Dream Mansion and Cinematic Conversations

02:15 • 2min

chevron_right

Navigating Property Expenses and Financial Strategies in Real Estate

04:38 • 6min

chevron_right

Mastering Financial Management in Real Estate

10:10 • 27min

chevron_right

Navigating Real Estate Growth Challenges

37:26 • 8min

chevron_right

The Golden Trio of Financial Success

45:30 • 19min

chevron_right

Actionable Steps to Implement 'Profit First' in Real Estate Investing

01:04:33 • 2min

chevron_right

Navigating Online Presence and Building Profit Habits

01:06:06 • 3min

chevron_right

Profit First

Transform Your Business from a Cash-Eating Monster to a Money-Making Machine

Mike Michalowicz

In 'Profit First', Mike Michalowicz introduces a behavioral approach to accounting that flips the conventional formula from 'Sales - Expenses = Profit' to 'Sales - Profit = Expenses'. This system involves taking a predetermined percentage of sales as profit first and then allocating the remainder for expenses. The book provides practical, step-by-step advice and case studies to help entrepreneurs manage their businesses more effectively, ensuring early and sustained profitability and long-term growth.

Rich Dad Poor Dad

What the Rich Teach Their Kids about Money - That the Poor and the Middle Class Do Not

C.P.A. Sharon L. Lechter

Robert Kiyosaki

The book tells the story of Robert Kiyosaki's two fathers: his 'poor dad,' a highly educated but fiscally poor man, and his 'rich dad,' the father of his best friend who was a successful entrepreneur. It emphasizes the importance of financial education, distinguishing between assets and liabilities, and building wealth through investing in assets such as real estate and businesses. Kiyosaki argues that a good education and a secure job are not guarantees for financial success and provides practical lessons on how to make money work for you rather than working for money.

The Book on Rental Property Investing

How to Create Wealth and Passive Income Through Smart Buy & Hold Real Estate Investing

Brandon Turner

The Book on Rental Property Investing by Brandon Turner provides practical advice on creating wealth and passive income through smart real estate investing. It covers topics such as finding deals, managing properties, and maximizing cash flow. The book is designed for both beginners and experienced investors looking to build a profitable real estate portfolio.

Profit First for Real Estate Investing

David Richter

Profit First for Real Estate Investing, written by David Richter, is a financial management guide tailored for real estate investors. It adapts the Profit First method, originally created by Mike Michalowicz, to the unique needs of real estate investing. The book provides a simple cash flow system that prioritizes profit allocation and disciplined expense management, helping investors to reduce stress and build a healthy and profitable real estate business. It includes practical steps such as setting up specific accounts, assessing financial health, and leveraging financial data to attract better deals and private lenders.

The Road Less Stupid

Keith J. Cunningham

The Road Less Stupid is a business guide that emphasizes the need to minimize dumb decisions and maximize critical thinking. The book, written by Keith J. Cunningham, highlights the concept of 'dumb tax' – the financial and emotional costs of making poor business decisions. It advocates for regular 'Thinking Time' to reflect on business challenges, separate problems from symptoms, and make informed decisions. The book is structured with short chapters and reflective questions to help business owners improve their decision-making skills and avoid costly mistakes.

The Book on Managing Rental Properties

Heather Turner

Brandon Turner

The Profit First system was revolutionary when introduced by Mike Michalowicz. In simple terms, Profit First allowed small business owners to take home bigger paychecks, reinvest in their business, and scale with ease, oftentimes while doing even less. The age-old adage of “do more work, make more money” was turned on its head by simple accounting practices. In reality, the business owners who were doing the most work were making the least, while business owners who truly knew their numbers worked less, made more, and had more money to invest.

After reading Profit First, David Richter knew that this same system could be applied to real estate investing. David grew a rental portfolio himself by learning from a local mentor. This mentor had a growing team, a scaling business, but was making less and less with every deal done. As David investigated more real estate investors’ businesses, he found that this wasn’t an isolated case. Most investors were making low wages, working far more than at the jobs they had quit, and had inflated businesses, to say the least.

With some simple accounting practices, which David describes in this episode, real estate investors can turn their business into Profit First powerhouses using very simple steps. If you’ve been feeling burnout from a barrage of deals, but aren’t seeing the profit you’ve worked so hard for, you’ll want to pick up David’s new book, Profit First for Real Estate Investing!

In This Episode We Cover

The Profit First formula and why most real estate investors calculate profit all wrong

The biggest mistake that real estate rookies make when starting their businesses

Why more deals doesn’t automatically equal more money in real estate

The rockstar team member that can make or break your business

The “golden trio” of accounts that every investor should have set up

Redefining the “pay yourself first” method of making money

And So Much More!

Links from the Show

BiggerPockets Youtube Channel

BiggerPockets Forums

BiggerPockets Pro Membership