Imagine that you are on an African Safari. As you are working your way through the jungle in search of big game, suddenly you are confronted by a lion with a bad attitude. If you were armed like Rambo with a huge gun and lots of ammunition, you would probably come out of the encounter in pretty good shape. But what if you only had a small caliber peashooter with one bullet? The results might be quite different and you would certainly be very careful about using your lone bullet.
These days real estate investing can seem very much like that safari. There is plenty of game to be had, but bullets are scarce. In the days of easy money it was almost like walking into a fast-food restaurant. You could get your happy meal complete with burgers, fries, drink, and a no income verification mortgage on the side. With today’s tightened lending standards in can feel very much like hunting without any ammunition.
Afraid to Shoot
With the virtual extinction of 100% financing and lenders freezing or drastically reducing credit lines, many investors have little or no ammo left to hunt for investment properties. With investor loans, if you can get them, requiring a 20% down payment, many investors are reluctant to pull the trigger on a deal. What if they commit their capital only to have a better deal come along? This fear can be paralyzing.
Many seasoned investors started out with little or no capital, yet they found ways to get deals done. I started in the days of assumable FHA mortgages (I know, I’m showing my age) that didn’t require qualifying. If you could convince a seller to take is equity in the form of a note you could do a deal with little or no money down. Although today’s mortgages are not assumable, you can accomplish pretty much the same thing by acquiring properties “subject to” the existing mortgage. While you are violating the due on sale clause of the mortgage, it is becoming a fairly common way of doing business. You may have some headaches if the lender finds out, but if the payments are kept current they probably won’t. The biggest problem is that so many homes do not have enough equity to allow these deals to make sense.
There are other methods that can be used such as seller financing and lease options. It certainly requires a lot more effort to uncover these deals. Being a successful investor is hard work but extremely rewarding. While you need to exercise due care and caution, you also need to avoid freezing up.
Develop success from failures. Discouragement and failure are two of the surest stepping stones to success. – Dale Carnegie