Do you want to close your next deal as soon as possible? If you are like most investors, the answer is a resounding “Yes.” When a new deal comes your way, you need to be ready to act quickly. If you drag your feet, the opportunity will usually pass you by. Being ready to make an offer means more than just having the desire to buy. You need to have everything lined up and ready to go the day that your offer is accepted. If you don’t, you will lose time and money. This can ruin even the best of deals.
Between deals, you should spend time gathering as much information as possible. You should have an idea of what kinds of properties you want, and in what locations. If the deals aren’t there, you can look at other areas. However, refrain from pursuing a deal just because it is a deal. A bad deal will set your business back months. It is easy to get restless between deals, but you should use this time to gather information and contacts. By getting all your documents and contacts in line, you will be ready to go when a deal comes your way.
The first thing you need to have ready is your financing. Whether you are using private money or bank financing, funding has to in place before you make an offer. If you are getting a mortgage, there are many items that you need available. This starts with knowing your credit score. You should look at your credit every month to make sure there are no new unwanted items on it. Investment loan programs depend on your score. If it falls below a certain level, you won’t be able to get a loan regardless of down payment. Besides your credit, you should have your income and asset documents ready. This means having two months worth of bank statements and two years of full tax returns. You should also have all leases and any other sources of income available. If you can close within thirty days, you have a higher chance at getting your offer accepted. Every day you have to wait to gather these documents can cost you. You won’t close on any property without financing in place. Stay on top of this as you get closer to making an offer.
Depending on what you want to do with the property, you will need reserves. Rehabs will need a greater amount, but all new purchases need money. You should always have an idea of what money you have available and what you may need money for. If you have a large tax bill due next month, buying right now may not be a great idea. Your purchase money will be tied up for several weeks – if not months. Getting a new property can actually do more harm than good if you have other obligations on the horizon. Take constant inventory of your financial situation at all times.
The best investors know they can’t do everything themselves. It takes a solid team to make the most out of every deal. Everyone from your contractor to your attorney is important. Even if you have worked with them in the past, you should stay in touch with them and find out their upcoming schedule. If your contractor is booked for the next two months, it is not realistic to wait until he is ready to start working. If you don’t have solid backups in place, you will be forced to scramble around and possibly overpay for any work. If you are truly ready to buy, you will have people you can call in a pinch. You may think you can do this during the closing process, but you may be preoccupied. Employee hiring should happen when you want to not when you need to.
Being ready to buy means knowing how you are going to get out of your investment. A solid exit strategy must be in place. Getting a deal and trying to figure it out after is a recipe for disaster. Things will always change from deal to deal, but you need to have an idea of what you want to do before you offer. This means having a good grasp on the market and your goals. A good deal is only that if you can do something with it. If you can’t sell quickly or at the price you desire, it is not a good deal for you. This all starts with having an idea of what you want out of the deal before you go in. If you cannot get out, don’t even bother going in. Not every good deal is a good deal for you.
Making an offer is making a commitment to buy. Once you make that commitment, it is difficult to back out. You never want to have doubts or regrets on any deal. If you are not ready to act once your offer is accepted, you will face an uphill battle from the start. It doesn’t take much to keep ready to act. This starts with your financing and continues in knowing your exit strategy. Those investors who are most prepared usually end up with successful deals. Be ready to act when opportunity comes your way.