Real Estate Investor – Part Three
Friday, September 4th, 2009Real Estate Investor – Part Three
Even the most experienced real estate investor can get excited when opportunity knocks and pressures their investment plan. Sometimes good real estate opportunities arise quickly and require immediate attention. Ideally, the investor has time to involve the team of professionals, but sometimes the pieces are hard to pull together.
One of the mistakes investors make is to act without doing the necessary legwork and before performing responsible due diligence. A good investor always finds a way to get the homework done on time. Many times contingencies are the investor’s best friend. Whatever it takes, protect yourself and your plan. Use contingencies to assure enough time to perform due diligence and get your estimates.
Another tricky forecast that can get the investor in trouble is the inability to properly project cash flow and carrying costs. If the strategy is to buy, hold, rent and manage until certain profit levels are achieved, cash flow is critical. In today’s market management fess for single-family rentals can run as much as 7 – 10% per year.
Real estate investing is about addressing your plan. Determine if you are a part-time investor or if you are a serious, volume investor. If you are in it to win it, establish a steady pipeline of possible investments. Keep the possibilities coming and sweet profits will follow.
Just as important as building that never-ending pipeline is to develop multiple exit strategies. If you invest in a property and only have one way to exit, you should reconsider the investment. The real estate market is like any investment market. There are swings in supply and swings in demand. Cover all your bases.
Another area where investors must keep their eye on the ball is checking estimates for rehab and repair. Many times these proposals are a best guess estimate. Danger lies in those muddy waters. Get on top of your estimates, allow for increase and proceed accordingly.
Happy real estate investing!
