Even the best plans can fall through from time to time. Instead of making plans and hoping for the best, you should take the time to make sure you are protected in the event they don’t work out. A common predicament for many investors is buying rehab properties with the thought that it will sell within six months. When the process takes longer than they thought or they realize their sales price is unrealistic, six months can come and go in the blink of an eye. This can either leave them scrambling to get out of the property or move to a comfortable fallback plan they set up months earlier. Having said that, it is always important to have an alternative plan if your property doesn’t sell.
Short term loans with private or hard money lenders may seem like a good idea, but they put you on the clock from day one. There is nothing wrong with pushing towards a deadline, but you never want the calendar to decide which deal you accept. Do everything you can to negotiate terms longer than six months. This will give you some much needed breathing room and not have you take the first low ball offer that comes your way. You may have to pay more every month and for longer, but at least you can get top dollar for your property.
Before you buy, you should look at realistic sales and have an idea of what area rents are. The longer you ignore the possibility that your house may not sell for your number, the more likely you are to get in trouble. Doing work with the idea of selling quickly can be the goal, but you need to know what you can rent for in case the possibility comes up. In addition, you should have an absolute bottom line number that you would accept and ways to pay for any loans for at least twelve months. You may very well get your price and be in and out of the property in four months, but it is those times when you are not that could set your business back.
Every day that the property doesn’t sell it is costing you money. In addition to any loan repayment, you need to factor in costs for insurance, utilities, taxes and other holding costs. If you miscalculate or ignore these costs, it will put more pressure on you to sell. You never want to look back and say you made a decision based solely on the current finances at the time. Give yourself a set number of days at each property listing amount and be ready to move if there is no activity. You should start out with a fair listing amount that will generate interest and not have buyers and realtors turn their nose when they see the amount. If you lose the markets interest with the initial list price, it is very difficult to get it back.
Many times you will sell for a fair amount and be on to the next property before you have time to think about the previous deal. It is not these deals that you have to worry about, it is the ones that don’t sell that will cause you problems. By being prepared for all options, you can take an unexpected turn in stride instead of having it wipe out your business.