Traditional real estate investing involves finding an investment property then going to a bank and paying at least 20% down on the property. This is done only if you have good credit and in this economy you better have great credit if you want to get a loan from a bank or mortgage lender. You will also have to show proof of income to secure the loan. This often times takes a while to do. It is not like you can go find a property and then be in it next week. It takes quite a bit of time to invest in property the traditional way.
Of course, if you meet all those qualifications you can still be a successful investor. There are many real estate investors that started out that way. There is nothing wrong with it. The drawback is that it is hard to do. Not everyone has the best credit in the world. Not everyone has enough money for the 20% down payment. If you try to wait and focus on getting your down payment and improve your credit score it may take a while. There is nothing wrong with making those improvements at all. What if you could get started in property investing without focusing as much time on those areas?
Big down payments increase your risk
If you are a traditional real estate investor you have to have a down payment every single time you find another property. That is a huge amount of cash you are giving. The more money you put in the deal, the higher the risk is to you. You cannot walk away from a deal if you have a lot of money invested in it. It does not matter if you have a lot of properties if you have no cash in your pocket. They have a term for this….its called being “real estate rich”.
Negative cash flow
Sometimes this is a problem for investors, especially in nicer areas. If property values are high it may be a bit tougher to have positive cash flow quickly. Sometimes investors have to own the investment property for a while before they are in the black on a monthly basis. You can get positive cash flow, you just have to be creative when structuring those deals. If your deal is a good one negative cash flow should not be a concern.
Being the landlord
You may think that being a landlord is not too difficult. What if you have several properties. Many investors get caught up in being a landlord. They end up spending countless hours tending to needs of their tenants. This is not what an investor needs or wants. If you are too busy managing properties, when do you have time to go find more and build your wealth?
Time is money…..especially in real estate investing.
