When you’re ready to make the leap from single-family or small multifamily investing to a larger asset, it’s easy to become excited by the opportunity and somewhat blind to the pitfalls. Today we share some solid advice for how to land a better deal and guard against some common mistakes in today’s edition of the BAM Blog…
The Grass Looks Greener
When you’re coming from single-family or small multifamily (such as 2-4 family) properties, you may find a deal that seems like a great opportunity. You might find an asset that looks a little run down, hasn’t been well maintained, isn’t being managed well, and you think you’re in a great position to swoop in and offer less to motivated sellers. Knowing you’ll have to make some improvements, you might also end up worrying more about financing than about doing due diligence.
BAM founder and CEO, Ivan Barratt, talks often and openly about reaching success in his long career in real estate as a result of learning from early mistakes – and never making the same mistake twice. When it comes to transitioning from single-family and small multifamily properties, Ivan too was taken in early on by being eager and underestimating expenses he needed to successfully run the assets. In Ivan’s case, some of those expenses were left out by others involved in selling the property. Ivan learned early on that due diligence and learning what a good deal looks like is vital, instead of getting caught up in the excitement and optimism that can come with the eagerness of getting the next deal.
In order to avoid that kind of situation, and being caught without the necessary funds and ability to successfully run an asset that you’re suddenly stuck with, Ivan has some practical and hard-earned advice. Ivan often suggests looking at at least 100 deals, to help develop what he calls a “fingertip feel” for what a good deal should look like. You’ll gain understanding of what should be there, and what might be missing. Looking at plenty of deals is the only way to gain a better feel to tell a good deal from a not-so-good bet. Ivan also advises that you should talk to property management companies on running “scattered sites” – which are properties small enough to not include on-site staff. You’ll gain a better understanding of what’s needed, what running the asset will take, and what you’re in for. By looking over many deals and talking with experienced scattered-site property managers you’ll limit your risk and any unpleasant surprises.
Want more advice from Ivan? Head over to ivanbarratteducation.com. You’ll find a free library with videos and articles filled with knowledge, advice, and experience straight from Ivan himself!