Sometimes the best financial decision an entrepreneur ever makes isn't how to run his or her business, but which business to get into in the first place.
That was the case for Philadelphia-based developer Doug Fath. He kicked off his career as the founder of an e-commerce business before making a pivot into real estate. Fath characterizes that choice, driven by a desire for steady monthly cash flow, as the best of his career. Below, Fath discusses how he found cash flow sanity — and lessons others can apply to their business, whether its employee count numbers one or hundreds.
Can you explain a little bit about what motivated you to pivot from e-commerce to real estate?
I read “Rich Dad, Poor Dad” by Robert Kiyosaki about how to achieve financial freedom. Basically you achieve financial freedom when you have assets that provide passive income — money you don't have to work for — that are greater than your expenses. When I read that, I thought,”that makes a lot of sense!” And I thought that real estate could be a good vehicle for doing that.
What changes, if any, have you made to achieve your goal of steady monthly cash flow since you got started?
I have a private lending company. We lend money to other real estate investors and developers. The reason we do that is because we get paid every single month on the money we lend out. It's just another form of passive income.
For the development projects that I do, we're either building new construction or we're fully renovating a building, so it could be six or twelve months before the asset starts producing monthly income. That's one of the reasons that the lending business goes really well with the development business.
How about specific tools or software? What do you use?
I use QuickBooks, both personally and in my businesses, to track all of my financials. Another great resource for education is “The Cash Flow Multiplier Course” by Hugh Stewart. This course helps you understand, manage and create your financial story. It also helps you create monthly financial rituals and meetings, which I now use in my businesses as well as in my personal life with my wife and bookkeeper.
Any advice for fellow entrepreneurs about high returns vs. regular cash flow?
Understand your end game. Know where you want to end up and what the best way to get there is. For me, this is the way that I feel makes the most sense. I'm learning and growing as I'm investing, but I'm also making money each month as opposed to putting my money in something and hoping five to 10 years from now that it'll be worth more. I still have those hopes that it is going to be worth more down the road, but whether or not that ever happens, I'm making money every month, and to me that's just a better investment.