Real Estate Investors Have to be Quick and Smart
Act Fast, but have it together; if you don’t, you might as well get out of the game.
The great news is that investing in today’s market is very forgiving, if you implement a few simple concepts and navigate a clear path to minimize your risk.
The not so great news is that if you don’t have it together you will, at best, lose out; at worst, lose money.
With properties flying off the market in record time these days, you have got to be decisive and quick; the current real estate climate is merciless and, at risk of sounding trite, if you snooze, you will lose.
One of the most recognizable differences between a “newbie” real estate investor, and an experienced real estate investor, is the time it takes to walk in, assess the property and make a decision about its viability as an investment.
The new real estate investor will often put in a lot of time checking the property, looking into the deal, re-checking the property, checking the competitive market analysis, having the property inspected and asking for advice or opinions; meanwhile, the experienced real estate investor will walk in behind him, take a look at the property, make a quick initial determination about whether or not the property is a good investment and, often without even having inspected it, get it under contract, thereby tying it up quickly and taking control of it.
What about consideration?
Won’t an investor lose his “earnest money” by acting so hastily?
Not if you have done your first line of due diligence; you should be prepared to snap up that property quickly by getting it under contract and then follow up with your “serious” due diligence.
So what is the first line of due diligence?
- Know enough about the area and what you are looking for.
- Know what kind of financial evaluation you need to conduct and know what it needs to look like when you’re done.
- Know your exit strategy.
This is where contingency clauses come in. A contingency clause is a condition, which must be met before a contract becomes legally binding. When you write up your contract, always make sure you have included contingencies. By putting the property under contract, you have basically made it yours; you control it. By putting in the right contingency clause, you will have a legal “out” should you discover something that doesn’t work for you as you conduct your “serious” due diligence; you will be able to get your money back.
When you have the property under contract you are the only one that can buy it and you only have to buy it if you want to. However, you will have that exit only if you have written the contract correctly, with the right contingencies, and if you have followed it to the letter.
Of course, you should always have your lawyer approve your contract and check your state’s laws that surround contingency clauses.
Use contingencies judiciously and use them ethically, but do use them because they will help you get that deal quickly and they will save your butt if it doesn’t work out.
Smart Real Estate Investors learn the ropes before getting into the game by getting some strategic marketing and real estate training. Do your homework; when you do, regardless of how new you are to the real estate investment game, you will be able to move quickly and make informed decisions so that you make money, not mistakes.