As an active real estate investor, I come across a lot of investment opportunities. Some deals need money and some involve playing an active role in the management of the property. No matter what category the investment falls into there is one thing that’s so important that it could be the difference between making or losing huge money; due diligence. It’s obvious when written like this but you have no idea how many bad investment decisions I see people make.
If you’ve ever been to a real estate investment seminar, network group, or even researched the topic on the internet, I guarantee you’ve heard those 2 words. Simply, do your research. Know as much about the property and deal as you can. Learn the numbers backwards and forwards, about whom you’re investing with if there’s a partner, what happens if things don’t work out, etc., etc., etc. This is real money, time or both and once you jump into a deal, it isn’t always easy to get out.
If the numbers don’t work, figure out why. If they look great, check them again to make sure your math was right. Does the deal fit into your long term strategy for your portfolio? There are a lot of things to consider so check carefully.
I recently came across a deal for a new construction condo that looked amazing on paper. A deposit of $15,000 no matter the cost of the unit. No 20% down between signing and occupancy, this was the only payment due until registration (not occupancy) and it was in a great area where condos are just starting to boom and the market is stable. Sounds good to me…
Once I crunched the numbers and ran different scenarios, I realized it wasn’t going to work. If I wanted to sell the condo right after it was registered (no assignments allowed), the costs to sell would eat up all my profit no matter the price paid. If I wanted to hold it long term and rent it, the numbers would never work as I would be losing $300-400 per month. What seemed like a great deal initially really wasn’t at all. Proof that due diligence is everything in the world or real estate investing.
Stay positive and patient for that right deal to come along; it will. You’ll be happy and less stressed in the long run. Happy investing!
(If you have any questions about real estate or building a strong portfolio call or email me today and we can discuss)