Eventually every real estate investor comes to a point where they are challenged with being able to get a real estate deal done. It is either on Financing, Funding, and Finding. Im going to use Financing as an example.
For some people this might be something that happens right out of the gate. So their first property is one where they have a challenge financing it. For other people it may be the 5th property or the 10th property or the 20th property, whatever it is financing will often become a challenge at one time or another. How investors deal with that challenge often indicates whether they will continue to grow or not.
When running up to this challenge some investors will talk to one banker and if they are told no, they will give up. Other investors will talk to three bankers and if they are not able to get a mortgage they will give up. Other more advanced investors will talk to five banks and if they are not able to get a mortgage they will give up. Still other investors will talk to five banks and three mortgage brokers, then they will start to work with private lender’s and they will also talk to credit unions. Then if they are not able to get a mortgage they will give up. Sophisticated investors will do all of the same as the last group, then they will talk to potential partners and generally look at outside of the box solutions. Those partners will act as mortgage qualifiers and help them to be able to qualify for a mortgage. And the will cross-collateralize assets, use VTBs, and continue to pushin order to be able to continue to grow.
How determined are you to be able to get your financing done? You cannot accept no as an answer. You must continue to be determined. If not you may want to partner with somebody else, who is more determined than you.
Eventually everybody runs out of money – Funding. This is the truth, when it comes to real estate investing. It could be that this happens when you are investing with your first property and you just don’t have the funds to be able to purchase it, but you have the expertise and the qualifications. For other people this could be there third, fourth or fifth property where they run out of funds. If this is something that happens to you, what are you going to do about it. Are you going to talk to different banks in order to get access to line of credit, talk to potential partners, use alternative income sources and see if you can utilize those as part of your funding strategy. Or do you give up?
Have you decided to approach partners and have them bring the down payment and you manage and find the properties and act as the property expert. If that is the case it is very possible that you will have unlimited growth. Challenge is for you to decide, whether you are determined to do this or not.
From even the most experienced investor’s I have heard “I can’t find a good deal anywhere.” There are a number of different things that you need to work through when it comes to finding properties but there is always a challenge. Will you step up to the challenge?
Where are you looking for properties, will affect your ability to find good properties. If you are looking where everybody else is looking, such as the MLS, you are going to be competing with everybody else (investors, homeowners etc) in order to purchase those properties. If you are willing to do, what other people aren’t willing to do, which is advertise or talk to people about properties that may not be listed on the MLS, then you are more likely to find opportunities that are coming up before others do. I have often found that there two ways to find great deals. You can either negotiate them or you can create them.
By negotiating a great deal you could be finding a way to help solve a problem that the seller has and in order to help them solve that problem you are going to be able to get a lower price on the purchase of the house. This could mean closing on a property in two weeks or allowing a seller to stay in the property for a few months after you close. Whatever that is, being able to solve a problem will allow you to negotiate a great deal.
The other way for you find a great deal is to create one. That is when you look at a property and see what other people don’t see. Maybe that is looking at a house that has an extra lot beside it severing that lot, selling it off and then keeping the house. That is taking a deal and being creative about it, in order to come up with something new. That could be taking a detached house and adding an accessory apartment to it in order to create additional value. What ever that is you need to be more creative than the other people who were looking at the same property.
Every real estate investor needs to focus on these three areas finding, funding, and financing deals.
Quentin D’Souza is the Chief Education Officer of the Durham Real Estate Investor Club. Author of The Property Management Toolbox: A How-To Guide for Ontario Real Estate Investors and Landlords and The Ultimate Wealth Strategy: Your Complete Guide to Buying, Fixing, Refinancing, and Renting Real Estate.