Preparing your portfolio During the COVID 19 Pandemic of 2020 many financial institutions and loan servicing companies agreed to put mortgage payments on hold, but the payments due are not forgiven. Some lenders have agreed to hold off on receiving the payment and some still want the minimum interest paid. Due to the jobless rates, Federal and State Governments are offering options to help families who are struggling in making these payments. However, when the forbearance period is over these families will still need to make those payments. In my opinion, the foreclosure rate will more than double and individuals filing bankruptcies will increase as well, especially if jobs are not replaced. What about the backlog of processed foreclosures that are on hold in the courts held by referees? Banks are in the market to make money not to hold and manage properties. Slowly and then suddenly, this will become a buyers’ market, meaning there will be more properties than buyers and buyers will get better deals. Properties can be found at live auctions or on-line auctions, on and off market deals with real estate agents, however, whichever the avenue you use you will be able to find them. Am I positioned to do so? With an investor’s mindset with no prior investment experience, how do I prepare to begin to purchase some of these properties? Your questions may be how do I prepare my real estate portfolio? Will I purchase properties in an LLC or S-Corp? Will I use my money to invest or OPP? Will I do this by myself or do I gather a team of other investors.? If so, what will be their roles and responsibilities? How do we structure the investment vs profit? Will I use a Real Estate Broker or find properties on my own? Do I know as many contractors as I will need? How much money do I need to start and what about repairs? How do I know when to hold or when to fold? Will I flip the property, or will I hold on to it for residual income? Do I even want tenants calling and plumbing issues in the middle of the night? One thing is clear and that is the foundation and formation of the business to begin investing must be sound. You should always meet with a Real Estate Attorney and Accountant to express your idea of a venture and find out the best way to form the Corporation. The most you would want to do is to avoid IRS penalties, but still derive maximum revenue from each property to reinvest in another property instead of entering a state solvency or in the red. Each property has its own scenario and you always can conform to the seller’s contingencies to make the best offer to obtain the property. How many properties you can obtain is determined when structuring the financing to do a purchase. Eventually, you will be able to obtain the deed. However, in the beginning start with one property, close and get the experience under your belt to see if this is something that you would like to repeat over and over. Don’t just measure the profit but measure the experience and your tenacity to move forward for the next property.
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