Are you a First-time Investor? The Three Foundations of a Private Money Loan.
As one starts out in real estate investing, you are going to learn very quickly what you are good at and what you need to do to improve your investment decisions. Unless you have done your due diligence and researched and planned a detailed investment strategy, you will come across many obstacles that will be initially unfamiliar to you.
Ten elements make a loan successful. However, three of those elements make up for the very core of a loan. Those three elements are experience, credit score, and liquidity.
As a first-time investor, it is crucial to understand these three elements and how they impact the progress of a loan.
Experience: This is essential, but it is also tricky to navigate for first-timers, given how they are just beginning their entry into the real estate investment market. At Kings of Capital, we work directly with real estate investors of any experience to ensure they feel supported in understanding the inner workings and nuances of real estate investing.
Experience is a vitally important tool in real estate. It grants you wisdom and knowledge of a property, it's value, and what kind of loan you should be applying for. It takes time and effort to acquire the experience you need, but it’s an investment of time in yourself.
For most first-timers, experience is a frustrating conundrum. It’s the paradox of the entry-level position asking for 2+ years of experience in a related field. It fundamentally is confusing and seemingly impossible to maneuver around. Luckily, with real estate investing there are no paradoxical prerequisites required in joining the program. The thing with experience is that the more you have of it, the better your chances and opportunities are for success.
Credit Score: Having a good credit score is also a valuable asset as it can determine how reliable you are and can affect what type of loan you can get. A good credit score can go a longer way than a bad one. If you have a bad credit score, you can still observe success; it just might take a little longer.
Liquidity: This is the final ingredient of a successful loan. It highlights how much money you have and measures your spending habits. Having a lot of liquidity can be suitable as you can seek more significant investments to gain higher profits. And with higher profits, you can invite higher levels of real estate investment.
Liquidity is one of the most essential things to manage when carrying a money mindset. You should always be aware of how much money you have on hand or how much you can get and how quickly. Understanding those key factors and using them continuously as data points when investing will save you the heartache of overspending or underselling. It helps you in understanding what kind of value you need for a property and to what kind of capacity loan you might need. Keeping watch on your liquidity is a valuable lesson that everyone should learn.
If it is your first time and you want to succeed, you must reach out, ask questions, and build relationships with people that understand the market better than yourself. Even if you do not have the experience to meet the desired qualifications, you can always use the resources you have to build yourself a network of top-notch experience.