THE KEY TO BEING A REAL ESTATE SURVIVOR
Have you seen that reality tv show, “Survivor?” The US version of the show first aired 20 years ago! The premise is that a bunch of people are delivered to a remote island and then face challenges to win a prize. Or have you seen the series “Designated Survivor?” In that show, a huge crisis hits and takes out the usual leaders. One man is appointed as the new leader and forced to figure it all out.
A survivor can be defined as “a person who copes well with the difficulties in their life.” I think a global pandemic and the subsequent economic turmoil qualify as difficulties, don’t you? A real estate survivor is then an investor who is finding ways to solve problems and face challenges.
Real estate survivors are not unique to these COVID times—we are simply a common conversation topic in the investing community these days. I should clarify we are NOT talking about anything related to the rights of survivorship or probate laws.
This is the story of real estate investors who plan for resilience in tougher times. So we researched some advice from the experts and found 4 common recurring themes that create and sustain real estate investment survivors.
- They all plan for solid cash-flow in their properties. Why? That positive cash-flow grows month over month to allow for things like: vacancy, repairs, evictions, and yes, even COVID or other unpredictable events.
- Most of them put a reserve fund in place as they purchase a property. Everyone has a different cash number or percentage, but the principle is the same: it’s like a little emergency savings account for EACH property.
- Loan-to-Value matters. Many experienced investors (and banks!) have a maximum percentage that they will finance on their property. They like to leave a “cushion” of equity: in case property values drop. Knowing that you can still afford to sell, as a last resort, definitely reduces stress.
- Creative but legal solutions. Our favourite investors aren’t afraid to think outside the box—but inside the laws and rules of real estate, securities and even tax laws. For example, some investors with a problem property will sell or partner with private home buyers or other investors. When a buyer is unemotional, they can see a “diamond-in-the-rough” and provide an exit that wasn’t as obvious in the regular marketplace. Another example is Seller financing: this is where a seller literally becomes the bank—making money on their equity rather than selling a property outright.
Is there one key to being a real estate survivor? Of course not. But we can all learn from the experts! Cash-flow, a reserve fund, and a conservative loan-to-value ratio are all things that every investor can plan for in advance. These first 3 measures will decrease the stresses and keep investors in the game long enough to truly create the financial wealth they are seeking. Unlike the reality tv show, or “Designated Survivor” there can truly be more than one winner=survivor.
Creative AND Legal solutions can also be part of an exit plan when the anxiety and chaos reaches an unmanageable level. We love to chat about all things real estate related. Connect with us anytime at https://mountainsedgerenovations.com/ or https://mountainsedgedevelopments.com/
FB @MtnEdgeRenovate and FB @MtnEdgeDevelops.
