The most frequent complaint we hear from our fellow real estate investors these days is that there isn’t enough suitable investment inventory. Investors drive neighborhoods, scour foreclosure lists, mail thousands of postcards, risk being fined for planting “bandit signs” on freeway exits, and still can’t find enough good deals. And when they do find an otherwise “good deal,” the excessive time and expense that was expended to locate the deal often makes the Investor question whether the deal is still worth doing.
If the Investor needs to bring in a joint venture funding partner, or fund the deal using a hard money loan, that only makes matters worse.
So what’s the solution? Simple. As an Investor, you must invest where the deals are. But, you might say, “I live in city (or state) X. I can’t invest in city (or state) Y,” which may be hundreds, or even thousands, of miles away.
Our response: “Why not!!!???”
Many of us who are in the business of Note Investing will rarely, if ever, buy a note that is secured by a property which is located in the city or state where we live. We routinely buy notes which are secured by properties that are located in cities which are hundreds — or even thousands — of miles from our homes. Why? Not because we don’t want to invest in the communities where we live. Rather, it’s because investing is a business and we go where the profits are. It’s really that simple.
But, the traditional investor might say, how can I conduct pre-purchase due diligence on potential investment properties? And after the purchase, how can I rehab and manage my properties?
These concerns can all be addressed with the cliche, “Your network is your net worth.”
Note Investors typically favor markets in various — and often distant — cities and states. The preference for these favored markets is often based on factors which include availability of inventory, market conditions generally, and the degree to which local law is amenable to investors.
Pre-purchase due diligence can (and should) be conducted through a variety of means, including a local Realtor with whom the Investor has done business with in the past or with whom the Investor intends to do business with in the future. The savvy and entrepreneurial Realtor will recognize — and be eager to take advantage of — an opportunity to join the network of an Investor who might bring the Realtor many listings (and perhaps even refer other Investors!) over time.
Ditto with contractors, property managers, and others in the real estate business.
Is growing and maintaining a strong network easy? No, of course not. But it’s absolutely necessary if an Investor wants to earn the Big Bucks!
To be successful over the long-term, we Investors must cultivate and rely on relationships with other real estate professionals. The other side of this coin is that we must divest ourselves of the false — and limiting — idea that our investment properties must be within a reasonable driving distance of where we happen to reside.
Note Investors and a small percentage of “traditional” real estate investors have long invested in locales distant from where they reside. For all other Investors who are looking for a solution to their “inventory problem” and for other traditional investors who want to grow their business, it’s time to abandon the self-imposed and false idea that we shouldn’t invest in areas that are distant from where we reside. Our quote of the week, which comes to us courtesy of our colleagues Chase and Robby, should inspire all of us to break free from artificial, self-imposed limits: “There are no great limits to growth because there are no limits of human intelligence, imagination, and wonder.” Ronald Reagan.
Although we admit that investing in distant locales is easier for the Note Investor, given the greater return on investment (ROI) that is typically realized in a Note Deal, as compared to a traditional “brick-and-mortar” deal, this fact, if anything, illustrates how much more important it is for the traditional investor to build and maintain a professional network.
If you’d like more information on Note Investing — including information on how to invest using your IRA or other retirement plan — click the following link to sign up for our free, no obligation Non-Performing Note Investment Program Webinar.
This communication is not, and shall not under any circumstance or for any purpose be considered as, an offer to sell any security or an offer to purchase any security. Nothing in this communication is, or is intended to be, legal, financial, or investment advice, nor is this communication intended to address the objectives or needs of any specific individual. If you require legal, financial, or investment advice, please consult your own attorney, accountant, financial advisor or planner, or other professional of your choosing.
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Actual performance may be materially different from that which is expressed or forecasted.
The Note Company is a Texas-based national Real Estate Note Investment Firm that helps Private Lenders and other investors reposition investment capital from under-performing uses to investments that are secured by real estate.