How to go about reaching our target of $1 Million in Assets
In my last post I talked about the need to set concrete goals. Without them, how will we know if we're on the right track? How will we know that we'll have any chance of reaching $1 Million in 5 years?
So, let's break it down:
We have limited funds to get started, say somewhere in the neighbourhood of $40,000. Since most commercial mortgage lenders will want a fairly sizable downpayment, that in itself will limit the size of our first investment to about $200,000. If we can replenish our savings over the next year or so to that same level, through keeping our regular jobs, being frugal and adding value to the properties we buy, and putting any net income back into this project, then we should be able to buy one property each year at that level and reach our goal.
Okay, where to look? I am still licensed, so I have full access to the MLS® and my network of contacts. Here's where it gets tricky though - there are a lot of listings out there, and very few that I would personally buy. I'm going to get a lot of flack for that, but let's be honest, really great properties almost sell themselves; REALTORS® aren't hired for the easy jobs, we get the hard work! We'll need to sift through a lot of dead wood to find those few properties that will fit our criteria.
I read somewhere, and for the life of me right now I can't remember where, that to find the diamond in the rough in real estate, you need to look at 100 properties, make offers on 10 of them, and expect to buy 1. If anyone knows where this idea comes from, please comment below and remind me! From my experience in working for buyers looking for suitable investments, the concept is probably sound since on average about 1 in 10 of our offers actually close.
This means that if we want to buy one property per year at about $200,000 each, we need to look at about 100 per year. 'Look at' doesn't necessarily mean, physically look at, it means evaluate by several means including: reading the financial statements, reviewing the maintenance records, looking at the tenant mix and their viability moving forward, and actually looking at those properties that show promise based on these other measures. Since 8 or 9 property evaluations per month should be really easy to do, I'm going to say we should look at 10 per month, on average, and do at least one offer per month. Might be a little over the top based on our goal, but I think we'll have a better chance at success this way.
Keep checking back to see where we are in our search. I'll be posting regularly with our ideas and progress.
So, let's break it down:
We have limited funds to get started, say somewhere in the neighbourhood of $40,000. Since most commercial mortgage lenders will want a fairly sizable downpayment, that in itself will limit the size of our first investment to about $200,000. If we can replenish our savings over the next year or so to that same level, through keeping our regular jobs, being frugal and adding value to the properties we buy, and putting any net income back into this project, then we should be able to buy one property each year at that level and reach our goal.
Okay, where to look? I am still licensed, so I have full access to the MLS® and my network of contacts. Here's where it gets tricky though - there are a lot of listings out there, and very few that I would personally buy. I'm going to get a lot of flack for that, but let's be honest, really great properties almost sell themselves; REALTORS® aren't hired for the easy jobs, we get the hard work! We'll need to sift through a lot of dead wood to find those few properties that will fit our criteria.
I read somewhere, and for the life of me right now I can't remember where, that to find the diamond in the rough in real estate, you need to look at 100 properties, make offers on 10 of them, and expect to buy 1. If anyone knows where this idea comes from, please comment below and remind me! From my experience in working for buyers looking for suitable investments, the concept is probably sound since on average about 1 in 10 of our offers actually close.
This means that if we want to buy one property per year at about $200,000 each, we need to look at about 100 per year. 'Look at' doesn't necessarily mean, physically look at, it means evaluate by several means including: reading the financial statements, reviewing the maintenance records, looking at the tenant mix and their viability moving forward, and actually looking at those properties that show promise based on these other measures. Since 8 or 9 property evaluations per month should be really easy to do, I'm going to say we should look at 10 per month, on average, and do at least one offer per month. Might be a little over the top based on our goal, but I think we'll have a better chance at success this way.
Keep checking back to see where we are in our search. I'll be posting regularly with our ideas and progress.
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