Newbies are told they can get started with real estate investing by “finding the deal and the money will follow”. But is it really true?
Let's say you have some real estate experience (SFH flips or rentals) and you decide that you want to build an apartment building portfolio to quit your job in the next five years. That's a great idea, and many people have achieved their dreams with this strategy.
So far so good.
You focus your energy on finding, analyzing and making offers on deals. No question, this is a most valuable skill. Especially these days, finding good deals is a challenge. With some persistence, and after looking at many deals and making offers, you finally get a live one. The deal looks great on paper and the broker is willing to negotiate at a price that makes sense. You start getting excited.
Then you realize that you have no clue what to do in the off-chance the seller might actually ratify a contract with you. You don't have the capital needed to close. But you remember the mantra that “if you found a good deal the money would follow” and so you don't worry too much about it.
You somehow succeed to put the deal under contract and now you start looking for the money. After a couple of weeks, and your due diligence period expiring in the next 7 days, you have one investor committed but you're still $200K short.
If you're smart, or have an experienced mentor or adviser around you, you would see the writing on the wall and terminate the contract before the due diligence period expires so you don't lose your earnest money deposit.
You're baffled. You found a smoking-hot deal but the money didn't follow.
What's up with that?!
In this article, I talk about what you could have done differently to avoid this situation.
Read the entire article on Bigger Pockets here.