If the real estate investing business was easy, everyone would do it. In reality, being a successful investor is much more difficult than what is portrayed on TV or read about online. On almost every deal and every property, there will be unexpected issues that you will be forced to deal with. Do not become complacent and lose track of why you are investing. Regardless of how successful you are, how you deal with unexpected issues will make or break your business. You can either let these issues get the best of you, or you can deal with them as soon as they become evident. The key is to avoid becoming complacent and remain focused on your end goal. Unexpected scenarios should not derail your deal.
Even before you take ownership of a property, there is a likelihood that you will run into “roadblocks.” It is the nature of the investing business. There are many things that need to come together: financing, sellers, exit strategies and buyers. Unfortunately, a number of issues can come out of nowhere and threaten the investment. The financing side of the transaction alone can cause many nightmares. Even if you are paying cash, you can still have problems with bank owned properties. Imagine waiting nine months for an approval that you are told repeatedly will come any day – at the 11th hour, the lender changes their tune and asks for 10% more on your offer. This happens more than you think, and you can either move on to the next property or bemoan the fact that didn’t get it.
If you do manage to get to and survive the closing, you are officially an investor. However, it is not time to become complacent. You are not out of the woods yet. There is an abundance of issues with bank owned properties and auction purchases. Many of these houses are bought sight unseen. You may not be able to see the interior before yhe purchase. If you do, there is only so much investigating you can do without being the actual owner. You never know what is lurking under the carpet in the basement or behind the walls of the bathroom. If you do come across foundation issues or mold, they can be very costly and will change everything with the property. These situations are not ideal, but if you wait to make a decision, you run the risk of more costs and time. Knowing that you may have to change plans midstream will lead you to make the best decisions possible.
In purchasing a bank owned property, you may inherit a tenant. In a perfect world, you would be able to work things out with your new tenants and come to a solution that works for both parties. Of course, real estate isn’t always perfect. You may want to get your new tenant out as quickly as possible so you can do the work you want and sell immediately. They may want to finish the school year out, or remain in the property for a variety of reasons. Offering monetary incentives may only go so far. If they truly don’t want to leave, you will have to work around it and rehab with them in the house or wait to sell until their lease is over. This may drag the process out a few extra months, but what is the alternative? You can try and get your way, but once you see that it is not realistic, you need to consider your options. You can spend months trying to fight your tenant without doing any work on your new house. The sooner you can accept your problem, the quicker you can work on solving the problem.
The market doesn’t care how much work you may have done to the property or the condition it was in when you bought it. You may see the comparable listings or sales and think yours is highly superior and want to list it as such. It is easy to get fooled by what you see on TV about homes being flipped for significantly more than they think. If you overprice your home, and aren’t quick to get off, you will do significant damage to your value. Buyers won’t be interested, the home will sit on the market and realtors won’t be quick to show the house. Once you do decide to make a reduction, it had better be big enough to get buyers back to your house. You can follow the indicators, but nobody can predict the market and a property will sell for. You need to be flexible, listen to the advice of your realtor and adjust when you need to. If you hang on to a set sales price in your head, you may be waiting for a price that never comes.
Buying low and selling high isn’t the reality for most real estate investors. The process can be a lot more complicated and there will almost certainly be issues along the way. The best investors know they will happen and instead of stressing out and complaining about them they take a step back and deal with them. This ability is more important to the business than picking out a countertop or figuring out what appliances to put in a rehab. If you can deal with the unexpected, nothing will get you off track.