Are you going to be a successful investor?

Everyone getting into real estate investing aspires to be successful at it. Sometimes when I talk to newer investors, there’s an expectation of success. I’m always a little wary of those investors because success without hard work is just luck. But being consistently successful is another matter. That isn’t just lucking out. Long-term success only happens when preparation meets opportunity. So if you are “lucky” enough to find a property you can invest in and have raised investor capital, how do you ensure you are successful? How do you prepare?

The first thing I recommend (and basically require) you to do is market research. I think it is really important that you use data and don’t rely on what people are saying. What happens is people are at a cocktail party and Joe says, “Vegas is booming and my properties are killing it.” An impulsive investor might jump on that and want to invest in Vegas without doing any of their own fact-checking. They don’t know the job growth, they don’t know the best place in the area to invest, and they don’t know that Joe may be losing his shirt on his investments and is just trying to raise money or save face. Sometimes people share information with you but it’s really just their own bias talking. That’s why it’s so important to do your own market research. I discuss all five of the qualities necessary to be a successful investor in the video below. Enjoy!

Until Next Time,

Ken

Facebook Forum – Question of the Week

Each week I’ll pull a question from the forum on Facebook and present it here. Below is this week’s question.

Kathi asks:

When negotiating with commercial lenders, do you have a specific format you use to compile and present your financials and history of property management? If so, do we have access to examples on your website?

Ken’s Answer:

Great question. Lenders typically have their own format for underwriting, however, they do want you to have all your financials and projections together to hand out during the meeting. They want you to understand and support your income projections via actuals and market information, if applicable. The expenses will need to be verified too. They typically look at a DCR or debt coverage ratio against your NOI or net operating income. Each lender is different. Basically, they look to your cash flow after expenses to pay the monthly interest payment…so be prepared to know this figure. It’s one of the most important things to know. That figure determines the loan.

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