I have been investing in real estate for over four years now and I have learned more things along the way than I could have every imagined. Most of this surprise came after taking a real estate course which made it seem like I had all the answers and strategies to get started, and then seeing how far from the truth that view really was! I have spoken to a few investors recently that not unlike myself freshly out of a real estate course thought that I had all the information I needed to get out then and run the strategies that they learned. The main thing that I see as the issue with the way these strategies are presented is that they only cover the ideal circumstances in which something would happen, and do not give the harsh truth about how rare that is in real estate investing. For example the courses tell you to try and use other people’s money or “OPM” to do your deal and have less money out of your pocket to do the deal such as a reno and flip project. There are many people that will lend you money out there but a lot of them may not be real estate investors and really may not want anything to do with a real estate project. The common scenario that I get asked is if someone would lend them the money to renovate a property based on the equity in the project property itself – this creates a number of risks for the lender that would be considered higher than normal such as:
-in the event of a default the would be foreclosing on a distressed property
-in the event of a death of the lender the distressed property would be sold at a discount putting their capital at risk of not being recouped
-Renovations can be fraught with issues as illustrated by countless shows on reality TV incurring higher costs that originally anticipated which could cause the investor to sell at a discount which also puts the investors interest and capital at risk of being repaid
The courses would tell you that someone lending in this dynamic would be easy to find, and I can tell you from experience this is most certainly not the case, if you would like to know more about hard money lending in Calgary please drop contact us anytime.