How to Know If Buying Investment Property is Worth It as a Blue Collar Business Owner

Building wealth outside your business starts with understanding cash flow, finding opportunities to add value, and knowing your numbers before putting money into real estate. Making good money in your business is one thing but urning that money into investments that continue paying you long after the work is finished is another.

For blue collar business owners, real estate can be one way to start building wealth outside of the company. Instead of relying entirely on the next job, the next customer, or the next busy season, you can begin creating additional income through properties that produce cash flow, build equity, and increase in value over time.

Last week inside Dirt to Dollars, we continued our Building Wealth Through Ownership series talking about investment properties, breaking down how to evaluate real estate deals, what makes a property worth buying, and how to avoid some of the mistakes that can turn a promising investment into another financial burden. Before you start looking at properties though there's one thing you need to understand - just because you can afford to buy something doesn't mean it's a good investment!

Take the Emotion Out of Real Estate

One of the biggest mistakes new investors make is buying properties based on what they personally like rather than what makes financial sense. You might find a beautiful house in a neighborhood you love, but if the rental income doesn't cover the expenses and produce a worthwhile return, what exactly are you buying it for?

On the other hand, an older property in a less desirable looking area might produce consistent income every single month. One example is my trailer park I own in West Virginia. It's not necessarily a property I'm excited to show off, but it puts approximately $5,600 a month into my bank account without requiring me to manage the day-to-day operations.

When you're evaluating a potential investment, you have to stop thinking like a homeowner and start thinking like an investor. It doesn't matter whether you would personally want to live there or whether the property looks impressive to other people. What matters is whether the numbers work.

The same applies to predicting which neighborhoods are going to become popular. Unless you have experience in that market, don't assume you know where property values are headed. Talk to real estate agents, property managers, and other people who understand the local market before making decisions based on speculation.

Understand the 1% Rule Before Buying a Rental

One of the simplest ways to start evaluating rental properties is through what's known as the 1% rule. The basic idea is that a property's monthly rental income should be approximately 1% of the amount you've invested in it.

For example:

This is a quick screening tool, not a guarantee that a property will be profitable. Actual returns depend on financing, local rents, repairs, taxes, insurance, and other expenses. It's easy to look at a property with an $800 monthly mortgage payment and think you're making money because it rents for $1,000. But what happens when the HVAC system goes out? What happens when the property sits vacant for two months? What about insurance, taxes, maintenance, and property management? That $200 difference can disappear pretty quickly.

Cash flow isn't simply the rent you collect minus your mortgage payment. It's what's left after you've accounted for the costs of owning and operating the property. Before buying, you need a realistic understanding of what the property will bring in, what it will cost to maintain, and how much money will actually be left over.

Look for Properties Where You Can Add Value

Real estate investors often talk about appreciation, which is simply an increase in a property's value over time. But appreciation isn't guaranteed, and you can't control what the market is going to do. What you can control is whether you improve a property in ways that make it more valuable. This is commonly called forced appreciation or value-add investing. For people in the trades, this is where your existing experience can create an advantage.

Maybe you're looking at a piece of raw land that could become a buildable lot with some clearing, grading, and site preparation. Maybe it's an older house that needs relatively simple renovations before it can be rented or sold. Or maybe it's a property with unused space that could eventually generate additional rental income. The important part is understanding which improvements actually create value.

A landscaper might look at a property and imagine installing an elaborate outdoor living space because that's the kind of work he knows how to do. But spending thousands of dollars on a custom hardscape doesn't necessarily mean the next buyer or renter will pay more for it. The same goes for expensive cabinetry, specialty flooring, unusual paint colors, and high-end finishes.

When you're renovating an investment property, you're not building your dream home. You're creating something that appeals to the people who will eventually rent or buy it. Neutral finishes, durable flooring, easy-to-maintain materials, and practical improvements can make more financial sense than expensive upgrades that only appeal to a small group of buyers. Your experience can help you recognize opportunities other investors might overlook, but you still have to make sure the cost of those improvements is justified by the value they create.

Know the Real Cost of Getting a Property Ready

The purchase price is only one part of what you're going to spend on an investment property. You also need to account for closing costs, financing, renovations, ongoing operating expenses, and the cash reserves required to handle unexpected problems.

Before buying, work through four important numbers: what it costs to purchase the property, what it costs to get it ready, what it will cost to operate, and what it will actually produce after expenses.

If you're buying a rental, that means thinking about vacancies, repairs, insurance, taxes, property management, and larger expenses like replacing a roof or HVAC system.

I typically try to negotiate property management fees around 10% of collected rent. I prefer having someone else handle the day-to-day responsibilities because the point of investing outside the business is to create additional income, not another full-time job.

There's also the question of cash reserves. Imagine putting nearly every available dollar into a down payment and renovations. You finally get the property rented, and a few weeks later the HVAC system needs to be replaced. If you don't have money available to cover that repair, you may have to pull additional cash from your existing business just to keep the rental operating. That's exactly the situation you want to avoid because an investment that's supposed to help build financial freedom shouldn't constantly put your primary business under financial pressure.

Have a Plan to Get Your Money Back

Before putting money into a property, you need to understand how that investment eventually starts producing a return. Are you renovating it to sell? Are you planning to rent it? How long will the improvements take? How much additional money will you need before the property can start generating income?

You don't want to get halfway through a renovation and realize you don't have enough cash to finish. I've put myself in that position before, committing money to real estate projects and then having to work through stressful periods to find the cash needed to complete them. But my willingness to take those risks comes from years of experience and an established business that can generate additional income. That doesn't mean the same approach makes sense for someone buying their first investment property.

If your contracting business is still struggling with cash flow, inconsistent work, or limited reserves, pulling money out to invest in real estate can create problems on both sides. Your business needs to be healthy enough to support your investments without putting its own operations at risk. The point of building wealth outside the business is to create more financial stability and options over time, not to put yourself in a position where one unexpected expense could jeopardize everything.

Don't Settle for a Good Deal When You Could Find a Great One

Not every property that's available is worth buying. And just because an investment looks decent on paper doesn't mean you need to jump on it. My personal guiding principle is "Don't do good real estate deals. Do great real estate deals."

Like my trailer park in West Virginia, the previous buyer had a $75,000 balloon payment coming due that she couldn't make and I was able to purchase the property for $75,000 cash. Theres also a more recent opportunity involving an old gas station that had been listed for years without selling. Rather than waiting for it to come back on the market at a different price, I contacted the owner directly and asked whether they'd consider selling it at the price worth it to me.  That doesn't mean every neglected building is a great investment. You still have to verify the renovation costs, rental demand, zoning, and whether the projected numbers are realistic. But it does show why finding a great deal often requires looking beyond properties that are already packaged and marketed to investors.

The Best Deals Might Come From Conversations You're Already Having

Working in the trades, you probably meet property owners, developers, business owners, and homeowners every single week. Those relationships can become one of your biggest advantages when you start looking for investment opportunities.

One time I had a casual conversation with a woman at a gas station mentioning I was always looking for real estate deals. A few days later, she called me about someone who had inherited a property and needed cash quickly. Next thing I know I'm purchasing a house for $30,000 that needed very little work before it could be occupied. The opportunity didn't come from spending hours scrolling through real estate listings. It came from talking to someone and making it known that he was interested in buying property.

Think about how many properties you come across through your business. Maybe you're quoting a demolition job for someone who doesn't know what to do with the land afterward. Maybe you're clearing an overgrown lot that's been sitting unused for years. Or maybe you're working for a customer who owns several properties and is ready to sell one. You don't need to become a full-time real estate investor to start recognizing those opportunities. You really just need to know what you're looking for, understand your numbers, and start having conversations. The more people who know you're looking for investment properties, the more opportunities you give yourself to find a deal before everyone else does.

Your Business Can Help You Build Wealth Outside of It

For a lot of blue collar owners, the business is the biggest income-producing asset they have. But that doesn't mean every dollar of profit needs to stay inside the company forever. One strategy we talked about is owning the property your business operates from through a separate real estate company and having the operating business pay rent.

I use this structure with my own headquarters. JC Property Development Group owns the property, while JC Property Professionals pays rent to operate there. The property also includes additional commercial rental spaces that generate income. Instead of having the contracting company own everything directly, the real estate is held separately and can continue producing income outside the day-to-day JCP operations.

Of course, this type of arrangement needs to be structured correctly, with appropriate rental rates and guidance from a CPA and attorney. But it's another example of how business owners can begin using the money their companies produce to build assets beyond the business itself. And that's really what this entire series comes back to.

You work hard to build a profitable business. You invest in equipment, employees, marketing, and systems to make that business successful. At some point, you also need to think about how you're going to use those profits to create income that doesn't depend on you continuing to sell and complete jobs. Your first investment property doesn't have to be impressive or expensive and it doesn't have to be the kind of property you'd personally want to own. It just needs to make financial sense, have a clear plan for producing a return, and fit into what you're trying to build long term.

Next week inside the Dirt to Dollars operator program, we're continuing our Building Wealth Through Ownership series talking about RV parks, campgrounds, and alternative investments. We'll explore opportunities beyond traditional rental properties, including how different types of real estate investments can create additional income and help business owners continue building wealth outside their companies.