For many beginners interested in real estate, a lot of their judgement is based in faith. How they feel about an opportunity.
What do you expect? For some, they may have beginner’s luck and find great deals that lead to profit. More often than not, you’ll be paralyzed by the overwhelming task of working in real estate or realize you’ve committed to something you weren’t prepared for.
That’s one major reason why I wrote “Catching Knives” and have dedicated time to sharing my knowledge of real estate to beginner investors. The truth is, the “intuition” or “instinct” I have about certain properties wasn’t always there. What I do have is knowledge of the trades to be able to see the potential in projects.
With that said, here’s what you need to study up on to be able to develop the insight you need to see the potential in distressed property and how to make unbelievable profits.
Upward Potential
Before I got into real estate, I worked in construction. Having an extensive amount of knowledge about how properties can transform has helped me immensely in upward potential, or being able to predict how to renovate a property to give you maximum return on your investment. I recommend everyone have a baseline understanding of construction to estimate costs for the renovation, how long it would take to complete, and if it’s feasible.
Think of it this way, would you be able to swing flipping a property for a year, but then be able to make the investment back after the fact?
Expect The Unexpected
It does not matter how much you plan. I want to put that out there. Even now in my career, the best thing I’ve done is mentally prepare myself for all of the things that can come up. If it’s not funding, it’ll be negotiations, if it’s not negotiating, it’ll be the construction… You get the idea. The more knowledge you have about the entire process of purchasing real estate, the more likely you’ll be able to swing at curveballs.
You want to avoid learning on the job when it comes to real estate investments. Surround yourself with people that can help you anticipate all the possibilities so when they do come, you’ll be ready.
Distress In The Market
Typically when I speak about distress in real estate, they think about the physical property. You probably imagine a real fixer-upper. Yes, this is distress, but there’s also distress in markets. This last year is a great example of distress in the market. Businesses were closed down, lenders were forced to adapt, and buyers were dealing with a completely different market than 2019.
This is important to study when you’re looking into real estate as well. Being able to understand the market of your property on a local and economic level will help you determine how good of an investment this will be.
I elaborate more on how my experiences have honed my ability to see what a property could turn into on The DJE Multifamily Podcast. If you want to learn more, you can listen to it here.
Don’t forget to snag a copy of my new book Catching Knives.
Packed with practical advice and personal anecdotes, this is your guidebook for embracing the next economic downturn and navigating the risk of distressed investing. With the right strategy, you can be one of the few who lean into hard times, make the most of them, and take advantage of once-in-a-generation opportunities.
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