When the real estate market tightens up, you need to be prepared with leverage in your money bucket so you can take advantage of opportunities.
Once you’ve been in the business for as long as we have, you start noticing patterns. The investing world goes through cycles every few years where things tighten up before flowing normally again.
However, a ‘bad market’ doesn’t necessarily mean bad news.
If you’ve prepared beforehand, you can actually take advantage of the challenging landscape to build some wealth.
What is a ‘Bad Real Estate Market’?
Essentially, what’s happening right now is banks are tightening up. This means most are lending out less money, making it harder for investors to get the money they need.
This also means that, over the next 6-9 months, people are going to be getting rid of some properties and fewer people will be buying.
If this sounds like bad news, don’t worry. If you’re ready for these market changes, it can actually be the perfect time for you to buy.
Filling Your Money Bucket
Since there’s going to be fewer loans coming out of banks, what can you do to make sure your finances are prepared for the shift in funding?
For every project, there is an amount of money that goes into it. We call it a bucket of money, or, your money bucket.
Your money buckets needs to cover purchase, rehab, closing costs, etc. Part of that bucket comes from lenders, and part of it comes from you.
If you’re a newer investor, don’t panic! Read on to learn how to build up that money.
Finding Money for Your Bucket
If you’re new to real estate investing, this is often the hardest part. However, there are many ways you can work to fill your bucket without needing to drain your personal bank account.
Obviously your lines of credit can be an asset to your money bucket, but Other People’s Money (OPM) is also important.
Ask around your friends, neighbors, family members, or investment clubs. Many of them could be interested in investing a few thousand dollars into a project with a secured return of 8-10%.
There are so many creative ways to help fill your money bucket from hard money, to lines of credit, to OPM. With more money in your bucket, you can do more transactions.
If you need help filling your personal bucket, reach out to us. We’ve coached many new investors through this process.
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