Let’s breakdown the three stages of owning an investment property. Understanding these three stages, and planning them out ahead of acquiring an investment property is crucial to your ultimate success. That said, things change all the time, and having some flexibility will greatly benefit your chances of success. What does that mean for you? That means you should have a backup plan for each of these stages just in case. I’ll provide a few examples of what you can do through each of these stages. Let’s get to it!
Stage 1: Acquisition
Of all the stages, I think this is probably the one most people get caught up on the most. And that’s really a shame, because it’s hard to win any game you don’t even start playing! I see numerous people keep themselves on the sidelines, because they’re waiting for the “perfect” deal. Let me be the first to say, waiting for the “perfect” deal will cost you so many great ones.
There’s lots of ways you can find the property you’re ultimately going to acquire. Depending on your market, that may simply mean working with a broker and finding something on the MLS. I’m shocked how few people are willing to do this. This stems from the desire to find a great deal. Most of the time, you won’t find that on the MLS. But that doesn’t mean you shouldn’t use it as one way to find a deal. At the end of the day, a good deal is better than no deal. And if you’re committed to being in this business for the long-term, the only way you’re going to find a great deal, is by getting through a lot of the good deals first.
If the MLS isn’t your thing, you can try working with a wholesaler, or even perhaps market to sellers directly to see if they’ll sell you their property. You’ll probably have a better chance of finding a better deal, but these methods aren’t easy, nor are they assured to work.
I’d suggest getting tapped into a few different wholesalers networks and have them send you what they have. If you want to join our buyer’s list, fill out the form on this page.
Stage 2: Operation
Once you’ve acquired a property, you should have a game
plan set for what you’ll do while you own it. Are you going to rent it out long-term? Or maybe try medium-term? Perhaps you’re looking to fix and flip the property. All of these strategies have their time and place, and depending on your goals some will make more sense for you than others.
The bottom line here is that whatever strategy you choose, make sure you leave yourself some wiggle room. Are you planning on flipping a property? Great, but what does your return look like if the market turns on you and you sell for $25,000 less than you planned? You’ll learn quickly that preparing for the worst ahead of time will save you loads of headache and risk. Ask yourself: “if I try to flip this property and it doesn’t work out, what does holding it long-term look like?”
We’re pretty partial to buying and holding properties for the long-term. That’s mostly because when you commit to that, a lot of mistakes can be fixed through time. We really just believe in the risk reduction that the buy and hold strategy presents.
Stage 3: Disposition
Your final stage of owning a rental investment is disposition, or your exit strategy. Depending on your Operational strategy, your exit strategy could be executed a couple months after acquiring the property, or more than a decade later. This is obvious to most people. What’s not so obvious is that how you sell your property is just as important.
For most people, you’ll have the ability to sell on the MLS. No matter what Operational strategy you choose, the MLS is probably your best bet.
But what happens if you rent your place out for 10 years, and the tenants that stayed there last absolutely trashed the place? Well, then you have a bit of decision make. Do you sink money into the property, so you can list it on the MLS? Or, do you work with another investor to buy the property as-is for a slight discount? Let the numbers, and also the stress, guide your decision here. At the very least, you should absolutely understand a few of the options you have for exiting your position. Any wholesaler you are linked to might be a good place to start if you just want to sell to an investor directly.
Having a plan for each of these three stages of owning an investment property will greatly increase your chances of success. We’re here to guide you through your plan for each of these stages for the next investment property you’re looking for. Fill out our form here and we’ll be in touch to hear more about where you’re at, and where you’re looking to go!
With Gratitude,
-DH
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