Our life has never been this extraordinary. Nowadays, we are living in a scary time and all we want is to take our money out of investments so we can stick it under our mattress until things get a little better. But let us face the truth – things will never settle down anytime soon. Our world seems going from one catastrophe to the next.
We can’t stop because of fear, we have to face these threats daily, and we can’t just stop our investments. The real estate market is really unpredictable and vulnerable these days, but here are a few things you can do with regard to investing in real estate.
Invest in deals that make financial sense. Managing your money and making sound financial decisions are difficult. No matter how much we try to save and invest our money wisely, we sometimes make choices in our everyday lives that don’t really make financial sense.
For example, in buying a house for the first time, we get too excited that we forget to check the basics yet the most important factors when looking for a dream house.
Don’t get sucked into the excitement of house hunting. Determine first the financial implications of changes in one or more variables in a mortgage financing arrangement with the help of an online mortgage calculator. This way, you can discuss future expectations and perhaps buy a smaller house and take on a lesser mortgage amount that would be more comfortable in the long run.
Trust in the numbers. Single-family and small multifamily income-producing properties in small towns are some good investments as of the moment because the rent-to-price ratio there is much more attractive and prices are less volatile. To get an instant equity, buy them at 60 percent to 70 percent of their value, then you can refinance it to keep liquid cash in your account.
Another sound investment you can make is the condominium properties. In this time of a pandemic, condominium units are an attractive investment option as our current situation has highlighted the need for the workforce to be in an integrated community where there’s immediate access to essential goods and services, as well as to health services and facilities.
Raise capital and be ready for opportunities. Some great deals are shaken loose by the uncertainty in the market where the cash spigots starts to shut off and many lenders restricting their lending criteria. When the lending activity slows down, the best deals become available and before that happens, you have to work to be ready. Grow your network to meet more accredited investors and create another fund to raise money or try to hit the phones and send emails to stay close to current investors.
If you can’t beat them, lend to them. It’s increasingly hard to hit the numbers you need to make a flip or development deal work in the market. Flipping homes is an expensive business. If you don’t have at least 20 percent equity in a property after your expenses of buying, renovating and holding, then you’re probably not going to make any worthwhile profit and could lose a lot of money. With too many flippers cutting their target profit dangerously tight, choose not to compete with them in their race to financial loss, instead lend money to them and make a profit. It’s much safer than doing the deal yourself, it takes much less work and stress on your part, and you still make a valuable return for yourself and your investors.
Just make sure not to lend more than 65 percent of what the home is worth and take a deed of trust on the property, so your money is backed by a tangible asset if anything goes wrong or you can take the property back, in any case.
For your investments to stay afloat; you have to feel positive about the future. Stick to the fundamentals, do safe deals, and make security and liquidity your priority to find the deals that make sense.