When you were studying for your driver’s license you had to make sure that you had everything in order before you took the written and driving tests. If not you would have to go back and redo everything. The same goes for trust deed investing you want to make sure that before you attempt to borrow you have all your prerequisites taken care of.
Contingency is the most important word to keep in regard to commercial real estate. The first thing that you should focus on is a backup plan in any event something were to happen to you. For example, if you were to get hurt during the life of the investment, you would need to make the necessary arrangements so you do not default on the monthly payments. Each day investors are faced with unexpected setbacks. Since trust deed investing does affect your credit planning before hand will help you before your investment does too much damage.
In regard to credit, as stated in previous articles, you do not have to have the best credit in the world to take on a trust deed investment. There are other options you have to get money, such as a hard money lender, but you want to make sure that your credit is still acceptable. It does not need to be around 780, but having a little padding would not hurt.
Commercial real estate, in general, requires you to do as much background work as possible so there are no mishaps that could hinder your investment. The biggest stumbling block that most investors face is the preliminary research that needs to take place. In regard to research, many fall short calculating the value of the property.
This, in turn, could affect your margin of safety if, in any event, you were to fall behind and default on your loan. Say you valued a certain property at $300,000 and you were able to borrow a loan $200,000, your margin of safety would be $100,000. Now fast forward a few weeks after the ink has dried, and you find out that the property was only worth about $250,000. Now if you were to run into any issues your margin of safety is dropped down to $50,000.
One of the best things that you could do to prepare for a new investment is to know when you are not ready. It may be tough at first, but quitting before you figure out it is too late. It is much better to start from ground zero than to dig yourself out of a deep hole.
Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true.
Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.