As this great suppression of the economy rolls along, people and businesses are becoming more inclined to hold on to their cash. The world is filled with uncertainty. When will it all end? When can we re-open? Will my employees come back? Will my customers come back? And so on and so on. How does a business person know what to plan or even begin to plan right now?
They do not know. So they wait. They wait and hold their cash.
To me this means that going forward, cash, as it has been in times past, will again be king. Heck, I might even go so far and say it will be emperor in the coming months and years. Thus, if you as an investor have access to cash, either your own or other people’s, you may be in a position to pick up some great real estate deals and build wealth.
Think about it. How do most investors acquire properties? Most seek out some type of institutional financing, either through a bank, credit union or a mortgage broker. While I have no problem with that, those sources of funds seem to be drying up and that trend may continue, just like they did in 2008/2009. I vividly remember 2009. One day everyone could get a loan, the next day, poof, all gone. So what happens when loans dry up? Prices fall and those that have access to cash can pick up some very good deals. Which is exactly what we did in 2009.
As an investor, you need to position yourself now to have access to cash. You need to seek out those that have the cash and cultivate a private landing relationship with them. Folks who have cash will be looking for places to invest as the banks may well trend towards negative interest rates and the stock market may seem too risky. Real estate investors can position therefore position themselves as one of the best and safest places to invest.
How?
First, do not judge a book by its cover. You never know who has money and you should treat everyone you meet like they are a potential future lender. No need to appear and sound desperate or oversell yourself. You are simply offering a product that the person with cash needs.
One of the best ways to find folks with cash is to start the conversation with a quick and succinct “elevator speech.” Think about what you would say to Warren Buffett if he happened to step on an elevator with you and asked “What you do?” Would you be ready to quickly describe what you do and take advantage of the opportunity? Would you say something along the lines of “I invest in real estate and offer 8% to 10% returns to those who invest with me. Interested in hearing more?” You see what I mean. Lots of people you interact with will ask what you do. Be ready with a quick speech and again never underestimate. If interested, they will continue the conversation.
Third, get yourself together financially and learn how to present yourself financially. Sure, some people may invest with you on your word alone but they are few and far between. Most are going to want to see qualifications and experience. Learn how to put those things together and present yourself well.
Finally, a word of caution on being too creative with other people’s money. You can get into a lot of red tape and trouble when you co-mingle funds from different people. To keep things simple I like to go with one lender per property. It just makes things clear and easy. Yes, you can co-mingle other people’s money but doing so starts to trip a lot of state and federal rules. Be careful as you can get yourself in hot water very quickly. Seek competent advice if you want to pool funds.
Going forward, I fear that the interventions by government and quasi-government agencies such as the Federal Reserve will get worse before they (if ever) get better. Demands to “do something” in terms of price controls regarding rents, mortgages and even food prices may lead to further interventions in the market and even further investor and entrepreneurial uncertainty. It is a vicious circle. But there will be folks looking for and wanting to put their cash in a safe place. Prepare yourself to be that safe place now by following the advice outlined above.
Kevin Perk is the founder and publisher of Smarterlandlording.com. He is the author of Advice From Experience To New Real Estate Investors. Subscribe to Smarterlandlording here. Contact Kevin here.
