In our series, Finding the Right Property for Your Goals and Budget, you’ll learn how to find a property that is the right fit for your portfolio. We take you through every single step and show you how to avoid a bad deal.
As good ole Abe Lincoln reportedly remarked, “Give me six hours to chop down a tree, and I will spend the first four sharpening the axe.”
Preparation is key, particularly in a new venture. If you are a new investor, or perhaps, one with experience who is ready to rededicate themselves, there are 3 very basic concepts you will want to address.
No one should rush out to purchase an investment property. You may be eager to get going, but rushing in without preparing yourself can lead to endless regrets and bad investments.
Run yourself through these 3 important reminders to avoid wasting your time, energy and money.
- Be 100% sure you are ready to be an Investor
Honestly, it’s not for everyone, and that’s okay! You must first decide that you are ready to make the commitment.
To see success as a real estate investor (particularly a buy and hold investor) requires a specific mindset that some people struggle with. Can you look at a property and just see the numbers? Or will you forever be held up by the fact that you don’t personally like the kitchen?
Before you go any further, you must decide whether you will be able to see properties as assets.
Depending on the current market, the looking process can be frustrating, difficult, and long to sift through the multitude of deals and find the great ones. Don’t set yourself up to fail by going in with the “house shopping” mindset. You must have the mindset, discipline and vision of an investor.
2. Get the “what” and the “how” in place
At any given time, there are thousands of deals “on the market” in the area you are looking to invest in, and even more “off market”. Of these endless options, maybe 5-10% could be great deals with the returns you want. Even if you offer on all 10%, you’ll get maybe 1% of those you offer on (because every other savvy investor is bidding on the same property).
To cut down on the amount of time you spend searching for those 5-10%, you need to know WHAT you’re looking for before you start looking. Set your deal parameters first: type of property, condition, location, budget, etc.
Then, before offering on a single property, get your HOW in place. How are you going to buy it? Cash, Financing, Seller-Finance Deals, Private Money Lenders, Friends and Family Investors, etc. Have your financing dialed in pre-offer.
3. Stay active, VERY active
This is a numbers game. Any seasoned real estate investor has had to get comfortable with making many, many, many offers- and getting denied 90% of the time.
If you analyze 100 properties, and make offers on 20 of them, you can expect to get maybe 1-2 accepted offers. So, if your goal is to increase your portfolio even 2 properties per year, you need to be incredibly active!
Even for off-market deals, the same principle applies. Say you send out 3,000 direct mail post cards to motivated sellers, that may land you 30 phone calls, and from those phone calls you can hope to close 1 property well below market value.
Hope you are enjoying this series — Finding the Right Property for Your Goals and Budget – look out for next week’s article. You’ll learn the various ways to Finance your purchase.
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