There are those that might say you should not be “anal” about things or finicky in life for a variety of reasons, now in some contexts I would agree (and in general) you should not sweat the small stuff. However, in terms of how you should finance your real estate deals you should be as finicky as possible! There are a number of reasons why – firstly knowing your numbers inside and out on any deal is imperative to be able to mitigate your risk and turn a profit. Thus, you need to be as meticulous as a spider weaving a web to be able to nail those numbers down so being fussy here is a really good thing. Also, the rates that you get from the bank, hard money lender, credit union may or may not work for your deal the way you wanted to execute, and if the numbers do not give you enough options to have a plan A and B then you are greatly increasing your risk profile having the 1 exit strategy – which is never a good thing. In real estate no matter how well you plan and how much you focus on having your first strategy work, things could change in the market/economy that prevent that plan from working out with a good profit margin. For example: you plan to do a renovation project and sell the home in 6 months for a profit but prices drop by 25% over that 6 months and now you have a house you can’t rent out for enough money to cover its expenses. The way you could avoid this would be to make sure that the property will cash flow if you had to hold it, there is always more than one way to do a deal and make money you just have to think creatively enough to see all the options. Having the negotiation skills to make sure you are able to get seller financing is also a way where your finicky nature will ensure you realise greater profits than those that just accept their fate and have to constantly spend the full down payment to get into every property that they buy – eventually they will run out of money and a lot sooner than the picky investor! When talking with your mortgage broker (who uses just the bank to buy real estate anyway?) being “anal” over getting an open loan/variable mortgage is essential if you plan to flip any properties, otherwise you could be slapped with an IRD (interest rate differential) and trust me when I say that WILL eat into your profits in a big way. Those investors who are very finicky about the renovation budget they set not being exceeded will always make more money than those that just say OK and pay the contractor’s bill that was over the quote but within scope. There are a lot of things you should not worry too much about such as: spilt milk, bad weather, hangnails — but in real estate I am of the opinion that being finicky is just fine!
To your success!
Tim R
