their control. Follow-on deals are hardly ever the same, and it’s not uncommon that a series of successes is undone by a single misstep or an economic down- turn, which many pundits are predict- ing in coming months or years. For example, one misstep is when an investor begins to look at his or her portfolio as a whole or in aggregate rather than individually performing properties, thinking that “temporary” challenges are made up via strong cash flow from other properties. Sometimes exiting a worrying or time-consuming deal is best, as it enables the property investor to focus on other, more suc- cessful endeavors.
winds or major surprises arise? Backup plans and contingencies are critical to long-term success, and a strong lender relationship is as important as a line of credit. Among the tips and tactics are: • Create an investment plan, every year. It may not be crucial to a first- time investor, but documenting an investment strategy is extremely helpful for working with lenders and other co-investors, enabling them to see your approach, the highlights of success and your con- tingencies. Update it every year to reflect new market conditions, per- ceived opportunities and objectives. • Even all-cash investors should borrow to establish a track record. It’s the same as an individual who’s establishing credit for the first time:
Investors should create a lending relationship when they don’t need it, even in modest amounts, so that they have a relationship in place if borrowing becomes necessary. • Keep the business fundamentals of property investing in mind for each deal. • Do not overleverage the properties. While this can be easy to do during the good times, keep in mind that down times can occur, vacancies can increase and rental rates can go down. • Define a property management plan (self or contracted) and remember that different property types have different turnover and lease-up timelines. Further to that, some properties require tenant improve- ments to lease up, some do not. All factor into the “total cost of ownership” equation. In more than 35 years of assisting real estate investors from simple transactions to multiple and complex deals, Red- wood Mortgage has seen hundreds of property investors grow in their skill and success, across economic cycles. While no business plan is bulletproof, investors who practice solid property investment funda- mentals, maintain appropriately conservative and flexible approach- es, and seek out strong lender relationships are well positioned to thrive in good times and survive the difficult ones. •
HIT A SNAG? EVERYONE DOES. HERE’S A ROAD MAP What’s an investor to do if head-
Steve Belleville, MBA, is director of sales and marketing for Redwood Mortgage in San Mateo, California. Founded in 1978, Redwood Mortgage is an established
financial organization with 35 years of experience in arranging and funding mortgage loans in California. Redwood Mortgage and its affiliates have arranged about $2 billion in loans and currently manage a loan portfolio of over $275 million.
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