Prepare for the Unexpected
If you are in the real estate business, you know that things change. Remember, 2006 to 2008. It was hard on everyone, especially if you were way out on a limb taking risk. This is nothing new. Your business could be going great one second and the next second things are falling apart. You can prepare for the sudden drops in the market by being prepared for the unexpected. Be like an airline pilot, figure out every possible thing that can go wrong and prepare for it. Here’s a list of 5 things you can do to prepare for the unexpected.
Prepare for the Unexpected
- Understand Exit Strategies
Even before you make an offer on a property, you should have an exit strategy in mind. If you have a rental property and you need to sell it quickly, you should have an idea of what similar properties in your area are selling for and what is the lowest price you could sell for. The same is true if you are working on a rehab property. If a problem arises, you should know what you can do to fix it. - Avoid Cash Flow Problems
The best way to avoid cash flow problems is to only buy properties with a good amount of cash flow. This extra cash will give you some wiggle room. If you need to lower the rent to avoid a vacancy, you would be able to. When you have cash flow from your property, you will be able to make the best decisions for the long-term, and you can manage the property properly. - Diversify
If you use just one lead source, it can result in a problem at some point. The same is true with the types of properties that you buy. You can start with a few forecloses and maybe a short sale, however, you should have a few probate leads in there as well. The area where your leads are coming from is also important. Be aware of the risks of owning properties on just one street - Build Equity
With any investment property that you want to own long-term, it is best always to boost the equity. You can do this in a few ways. The first thing that you should do is make improvements and upgrades. If you do the right work for the market and the property, the work you do will boost your equity. If you pay down the loan balance, you can also boost your equity. To do this, simply make your regular payments and then add two additional payments each year. If you have a 30-year mortgage and you double up on one payment, you can take 12 years off of your balance. Even if you don’t intend to hold the property for that long, reducing the balance will allow you to refinance or sell if something unexpected happens. - Build Reserves
The best way to prepare for disaster is to have capital reserves. This will allow you to pay for unexpected maintenance problems or a sudden vacancy in a rental property. Reserves can also help you get through an extended gap between closings. It can also pay for leads to grow your pipeline.
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