Think about that one for a moment, money makes Real Estate investing easy. When Karen and I started out, we had a small line of credit, a bit of cash saved up and some huge goals. Along the way, we created bigger piles of cash, extended lines of credit and created even larger goals, but it wasn’t always easy.
When we look back at those initial purchases, many months were a struggle, every purchase a creative process to stretch our dollars and expand our portfolio. We delved into vendor take back mortgages to learn how to reduce the amount of cash we needed. We came up with ideas to extend closing periods and obtaining early access to properties to get a head start on renovation projects. We leveraged our credit cards and other people’s money (OPM) to extend our ability to purchase new properties.
Along with this we learned about joint venture partners, hard money with obscene interest rates, RRSP second mortgages that we could apply to our properties and pay investors double digit interest rates and short term higher interest loans. We also became adept at educating friends and family about how they could utilize their own lines of credit to obtain returns of 10% or higher from us.
We continued this way for the first several years and as the market values increased and our hard work eventually started paying off, we saw more and more money start to fill our bank accounts. As quickly as the money would come in though, we would turn it back into back into more properties. Eventually as the money continued to flow in, it became easier and easier to make more money in Real Estate and to purchase property without being as creative.
2006 and 2007 were very heady times. It seemed no matter what you bought, no matter how slow your renovations, no matter how you set up your financing, it became too easy to make money. With values going up several percent per month if you couldn’t get contractors in quickly it just meant more back end profit as values increased. You didn’t have to work at buying smart, you just had to buy.
You didn’t need to be creative with vendor take back mortgages, you didn’t really need extended closing times, and it simply became easier and easier to buy just with money alone. Now, here we are several years later and many of the rules have been reset back to our starting days and perhaps even a bit further back!
The last couple of years have put a severe dent on the entire market and have managed to turn Real Estate into much more of a challenge for many people. We’ve seen deflating prices, the uncertainty of the economy and certainly a significant amount of fear in the market. The easy money has certainly disappeared.
All of this change though has created a new environment of opportunity for many investors out there and as one of my earlier posts mentioned; many new investors are starting to appear, eager to get into the Real Estate business. A majority of these folks will be coming in with lofty ambitions and some optimistic goals. I’m here to say with the proper amount of work and determination thrown in these same types of successes can be recreated by anyone.
Sure having access to cash makes it easier, but if it was easy, everyone would do it!
