Good money follows good deals. — Tim Kosen
Last week I ended by saying “never let a lack of money get in the way of making you money.” I think we’re often inundated with opposing views from our friends, family and the media.
We hear things all the time like: “it takes money to make money;” “a bank is a place that will lend you money if you can prove you don’t need it;” “put your money where your mouth is;” and a personal favorite: “Money never sleeps.” To a certain extent these are all very valid points of view.
But the real danger is in letting your current situation prevent you from chasing your dreams or taking advantage of opportunities when they come up.
In the case of the Tudor Street property, I mentioned last week, my time and cash were already pretty well allocated between other projects in San Diego. This posed a pretty big problem when my offer was accepted. After an offer gets accepted, you deposit earnest money (in this case $2,500) and have a few days to inspect the property (in this case, ten days) before losing the deposit. But after that, you have to figure out how to pay for the place. This property actually would have qualified for conventional financing but a lot of places I buy don’t. To qualify for a regular bank loan the house has to have annoying little things like cabinets, working bathrooms, a stove, and flooring. You know, all that stuff that makes it habitable.
When you write an offer on a renovation property, generally your offer is in cash or a cash equivalent. The seller of a distressed property generally has two things on their mind. First of course, is price. But really more importantly they consider the buyer’s ability to close the deal. Speed is often more important to a seller than money. And Tudor was not an acceptation. You are competing against other guys who can write a check for the place, so if you want to play ball, you have to be qualified to step up to the plate.
Now, who keeps $400,000 laying around in a checking or savings account collecting .0001% interest? I sure don’t unless something really big just sold. Let’s be honest, any investor with any money doesn’t generally keep it sitting around. They usually have it tied up in some investment making them money. In the world of real estate, there are two solutions to bridge this cash problem. First is a private or “hard money” loan and second is in taking on a partner. Don’t get me wrong, both of these options eat up a lot of your profit and can often be more trouble than they’re worth. But, if you find a truly good real estate investment, you won’t be the only one who thinks it’s a good deal and you will be able to find the money. Yeah, even if you don’t have any money, or if you have lousy credit, or. . . . (fill in whatever excuse you feel like).
FEAR AND GREED
When it comes right down to it, the only real things keeping people from following their dreams to financial independence are fear and greed. Fear of failure or loss (legitimate); and greed of wanting the whole pie rather than a good sized piece. (You could say ignorance and inexperience are both huge factors too, but really, the root of those two still comes down to fear and greed.)
HOUSE PROGRESS
Right now, painting is done, granite is in, bathrooms are basically complete and the place is really starting to look like a house again. This week at Tudor, we should be finishing up fixtures and flooring on the inside. We should be replacing exterior wood and prepping to paint. There’s still a lot to finish up but we are on the home stretch. Last week, we lost two days of work to lousy weather, but that made for some really pretty pictures. This is the video I took just over two weeks ago of the interior progress on the property.
