So the good news is that the market I have been investing in has shot up in demand. People are leaving the city and heading up to the Hudson Valley for more space, fresh air and less Coronavirus. This is great for the property values of my rentals, which is always reassuring. However, there are always two sides to every coin. While this growth is good, it also means that it is going to be significantly more challenging to find my next really good deal in that market. That means, it's time for me to get more creative, for sure.
The first two properties I bought directly off the MLS during the off season, winter, when prices are usually lower and you can sometimes find a deal. I was lucky enough to find two properties with motivated sellers, who wanted out quick. The first property was owned by someone living down in North Carolina, and he was just tired of managing it remotely and the second property was from an estate and needed to be off loaded and liquidized as soon as possible. I suspect it won't be as easy this time, but who knows? I'm planning for the worst, but hoping for the best of course. Because of that, I'm thinking I need to prepare to start finding properties off market. Even if a good one pops up on the MLS, it never hurts to have more options, right? I'm both excited and nervous to take on this challenge but I think I'm finally ready for it as an investor.
So here is my loose plan, and please feel free to offer suggestions or guidance. This is what I'm currently doing to prepare:
1) Restock the cash. Right now I'm trying to build up as much cash again as possible because I know that doing an all cash deal always helps to turn a good deal into an amazing deal. It also helps you to beat out the competition when a seller is really motivated and needs to close quick. Cash is and will always remain king. Time I get polishing my crown.
2) Continue to network with people up in the Hudson Valley. Not only would I like to own a home up there myself, for me, one day, but I just want to support the community more. The more people I know, the easier it is to give back. I hope that by meeting more locals and getting to know the community members needs even better, we can find some win/wins for all. If they send deals my way, I can give finders fees to help them out financially and I can continue to create affordable long term rentals, something the Hudson Valley, and Kingston in particular, is desperately short on. Additionally, I want to continue to create jobs. Each time I buy a place and fix it up, I support local tradesmen. I'd like to do more of that this year.
3) Revise and expand search criteria. So far, I have only bought single family homes (SFH) that are in need of minor cosmetic work. Yep. That's right. You can say I have a type. But just like in life, my tastes need to evolve. I started off with investing in something safe, and I'm super comfortable with those now, but I need to expand my comfort zone to grow quicker. The only way I'm going to be able to do this is by expanding my criteria. So I have created three new criteria checklists below:
Hopefully, by expanding my parameters this time around, I can find an even better deal in an even tougher market. I'm feeling optimistic about it.
4) Dabbling in pre-forclosures and foreclosures. This is something I have put off because I needed to think long and hard about it. I don't believe in taking advantage of other's misfortunes and I think a lot of investors tend to do that, which gives us all a bad name. I realize now though, the more I read, and listen to podcasts and talk to people, there are genuine ways to help people in pre-forclosures and foreclosures that can achieve a win/win for both parties. So I'm willing to give it a try.
With that being said I will not close on anything that isn't a great deal for all parties involved. It's important to me ethically to remain true to my values. I did start though by looking at the pre-forclosures closest to my rentals, in a neighborhood I care deeply about. I took the time to write a personal letter to see if there was a way I could help. Although I haven't heard back, I'm okay with that. The right deal will come when it comes, you just have to keep putting yourself out there and believe. It will happen when the time is right.
5) Open to seller's financing. Again, I have only used conventional mortgages thus far, and I've played it pretty safe. However, with lenders becoming even more rigid about lending, and expecting 25% down on all investment properties, I think I'd rather pay a person interest than a large bank interest. Morally, I think the more people I can help out directly, and remove the middle man of a giant corporation that hoards the profits, the more I will be living in the type of world I want to live in. Finding private lenders or sellers to finance is a way to do this.
6) I'm considering partnering on my first deal too. This one I'm still a bit hesitant about because when you legally partner with someone on a deal, it's essentially like a marriage and if it goes wrong, it can go really wrong. There is a legal contract and you have to work at that relationship. Of course there are benefits to partnering with someone on a real estate deal for sure: you can grow your business quicker, you can play off each other's strengths, you expand your network of connections instantly, etc. But there can also be some significant and catastrophic drawbacks: disagreements of vision, a partner doing something unethical and you are are mutually liable, the potential of destroying a relationship, etc. So I'm hesitant and cautious for sure, but open if the right partner comes along I'd consider it.
7) Read and listen to more podcasts that specifically talk about creative financing. The more stories you hear, the more ideas you have. This helps you to think in a different way about solutions for challenges. It expands your tools in your tool box and will help you to potentially find a deal that others overlook because you have the ability to solve a problem for both the seller and you in a way that others haven't thought of. I believe the more reading and learning I do now, the more I'll be ready when that perfect next opportunity comes along.
So any help, thoughts or ideas would be greatly appreciated. I'd like to continue investing in my target area. I'm very committed to continuing to create more jobs and safe and affordable long term rentals to Kingston. It's a wonderful community and I want to be a part of it for years to come. So I'm just gonna have to get creative!
Forever Grateful,
Mack