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  • Rick Martin

PLACING THE CART BEFORE THE HORSE. HAVING YOUR MONEY IN PLACE BEFORE THE DEAL COMES


Putting the cart before the horse, or in this case the chihuahua.

Today’s market is insanely hot. Drawing another comparison to the single-family home - people are asking ridiculous prices for their buildings, and overzealous, unwise people are paying them. When the correction comes, these unfortunate souls will face their reckoning, and this will create more opportunities.


Happy New Year, everyone! 2020 will bring us opportunities, so be ready, but also... be patient. Some of you have expressed enthusiasm to deploy your money right now. I know the feeling. You have the money to invest, and you are anxious to get it working for you. Buying an apartment is not totally, unlike buying your first home. You decide that you are ready to purchase a home. You scrape and save for your down payment, and you let your realtor know, and he or she starts scouring the market. You're excited, and you start going out every weekend, searching for that perfect place, thinking that you are just around the corner from finding it.

In most cases, reality sets in, and you realize that you are going to have to kiss a lot of toads to find that prince. In competitive markets, it can take six months to a year or even more. Unless, of course, you are willing to settle - many do. It tests your patience. However, one thing is for sure. You have secured your down payment. You have your equity ready to go.

Securing that equity is even further magnified in the world of apartment investing. This is based solely on the sheer number of zeroes. You need to round up the horses and pool the equity together before that deal comes along. In that sense, it contradicts the title of this article. We are gathering the horses to pull that cart - the cart being the apartment. When the right deal comes along, we must be able to close, and a large part of that equation is having the equity (or capital) in place to close. So much blood, sweat, and tears go into finding a deal, that it would be a shame to let such an opportunity slip through your fingers.

A tremendous amount of effort, research, and networking go into finding a deal. Does the market have growth in jobs, population, and income? Once you find the market, how can you find the right deal? Are you mailing out letters directly to owners? Are you establishing relationships with commercial brokers in your chosen market that are doing that seller networking for you? Has the deal appropriately been underwritten? What are the rental comps telling you, and is there room for rental growth? Again, so much goes into finding the opportunity, so you must have all your ducks in a row.

Today’s market is insanely hot. Drawing another comparison to the single-family home - people are asking ridiculous prices for their buildings, and overzealous, unwise people are paying them. When the correction comes, these unfortunate souls will face their reckoning, and this will create more opportunities. In today's market, there are opportunities that exist. Unfortunately, we have to kiss a lot of toads to find the right deal. 2020 will bring us deals, so be excited, be ready, and be wisely patient.