Planning for the Worst in Long-Term Real Estate Investing
No one likes to plan for the worst. In fact, I know a lot of people who think that planning for the worst is just being pessimistic, and that the best way to avoid having bad things happen is to avoid thinking about them. While on some level this does make sense, as a real estate investor I have found that not planning for the worst is one of the most fiscally irresponsible things you can do when you are involved in real estate investing. If you simply take a little time to map out the bad possibilities along with the good, you can turn even the worst-case scenario into a situation that you can maximize for wealth and profit.
When it comes to long-term real estate investing, the worst-case scenario is generally agreed to be that the property did not appreciate or that you cannot exit ownership of the property when you are ready. I think you will agree that both of these scenarios sound pretty bleak. However, there are several ways to plan for them to make sure that you come out on top.
We have already spent a fair amount of time discussing how to creatively exit long-term investments, so we will not address that further in this article. Instead, lets discuss some other ways that you can plan and prepare for the worst:
Plan for the worst when you are renting out the property
Try to set a rental rate that not only covers basic expenses, but that will allow you to put a small amount back every month into a security blanket account. Ideally, this account will remain untouched for years, and it should not be part of your general emergency fund. Putting as little as 25 or 50 dollars into this untouchable account for years will help you establish an emergency fund to use for upgrades, marketing or simple maintenance in the event that you are not able or not willing to sell the property when you planned to.
Set some low expectations
You probably dont hear that from your mentor very often, and do not get carried away with this advice right now, either! All I mean is that you need to determine not only the ideal scenario for how much you want to make off your property, but also the least that you can live with. Be pessimistic for just a minute, and determine what amount of money would enable you to accomplish whatever goals you had for the property or yourself when you bought it. If times get dire, remember this amount when you are negotiating a sale, and use it if necessary to help you make the decision to sell even if the situation is not ideal.
Do your investigating ahead of time.
While you own the property, do biannual (or more frequent) checks to make sure that you are still using the property in a way that generates maximum wealth. Not only will this help you maximize your investment, but it will also help keep you abreast of changes in the status of the property when it comes to zoning and other issues that could be red flags signaling you to get out early before disaster strikes. Peter Vekselman has been successfully investing in real estate since 1996. He has completed over 1200 real estate deals, owned a construction company, been a private lender, and owned a property management company. Peter currently works with clients all over the US helping them achieve riches in real estate investing. For more information please visit
www.CoachingByPeter.com. Planning for the Worst in Long-Term Real Estate Investing
By: Peter V
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