Morning Mr. Collier,
I hope all is well with you. When you get a moment could you please answer the below questions? Thank you for your time.
When referring to business which is more important, Capital or human capital?
Which is more important, the chicken or the egg? Whichever you have the least of at the moment! Personally, I’d go with human capital by a mile. It takes a while to build a team, find good people, and create a dynamic culture. Money is fungible, if there is a difference it is in the goals and personality of the humans behind it (Easy to work with? Realistic goals?).
How does one know when they are ready to hire their first employee?
When you can profitably leverage your time; when you have higher order things to do with your energy and someone else can do the tasks you are delegating for less capital than you can earn with the time you free up.
How much reserves should be in the bank before the first employee is hired?
See it more as a Cash Flow issue: Are they accretive to earnings? Will they create meaningfully more value/cash flow than they consume/cost? Will they contribute significantly more to the bottom line than they detract? Create more income than cost? Remember that the future earnings created is a variable, a projection, a future hope; the salary and related overhead is present given, a hard fact to be faced every payroll Friday i.e. there is risk.
How long were you in business before you took on your first partner?
And why did you when you did? And did you want or need to take on that partner?
The first one was a private individual who came to me with land to be developed and wanted to stay in the deal. The second one was decades later and was a Blue Chip Institution we sought out to buy a $50M+ community that required 30% down and we lacked the resources to do on our own.
What is your thinking behind needing team members/employees? Would you say you need your employees?
YES! I rely upon the TCC Team! Couldn’t do what I do without them! They are a tremendous source of support, energy, and ideas! I look forward to seeing them every day. We have a Team Member Wall in our lobby that folks’ pictures go up on after approx. 9 months of service; I get emotional looking at that wall and the quality of folks that have chosen to work with me, their dedication and commitment.
Or do you need a certain function fulfilled?
Hire an Outside Vendor/Independent Contractor in this case.
Is it true that passive income is taxed less than active income?
Tax is complicated and there is currently an effort to make major changes however capital gains (investment held over a year) are generally taxed at a lower rate than interest/dividends/salary and if you are in Real Estate full-time you are allowed to use losses from passive investments (RE depreciation) to shelter active income, otherwise limited.
As always, I share what I most want and need to learn. – Nathan S. Collier