Taking the Second Step... How to Proceed After the First RE-Investment

[contentking]

Hello there,

I'm a student, 24 years old and living in the Netherlands. I've been interested in real estate investing for some time and what it could mean for me. I just finished my first deal: a relatively small business unit, mainly for storage. Because of this investment, which is rented out, is my current savings balance quite low. Because of this, I'm having a bit of trouble on what to do next. I really want to set a new step and find myself a second investment project. The fact that I'm a student is not very helpful, in the sense that my financial sitation will not change until I start working (which is in one year). On the other hand, I notice that banks and financial lending institutions really show interest in lending money for projects such as mine (real estate to rent out). I thought i'd drop a line to this forum, and perhaps you could help me clear this up for me. I'd like to know when the next step should be taken. I've just bought my first property: do banks see me as different now? Are they still this lending-happy as before? Does this change the negotiation-strength for me (probably)? Does the fact that I do not have personal savings to bring in a new project matter? Should I appreciate my current investment (which, as I see it, is worth quite a bit more than I paid for it), and take it from there? Or should I simply wait a year or so, rebuild my savings once more, and then proceed to find a new investment opportunity?
All this considered the fact that opportunities are abundant in the country I live in.

Thanks in advance for your opinion on this. I'm sure there are some people who could relate to this issue, and tell me what they did back then.

Best regards,

CK

[Paso Dog]

Building a relationship with a good lender is going to be a very important part of your puzzle, because they will be able help you find the money if the project makes sense. This lender will become part of your team that will include Real Estate Agent, construction people, accounts and maybe more as you grow.

Good Luck

[contentking]

Yeah, that's what I had in mind as well... Related to this, I constantly see opportunities that actually make sense, due to the solid current renter (e.g. a decent grocery chain)... The numbers make sense, and still it seems that such opportunities go unnoticed for months and months by investors. I wonder why such projects just don't sell overnight... Is it me? Or is it the reluctance to lend on rented-out property by financial institutions?


Regards,

CK

[Paso Dog]

Talk to your lender and Real Estate Agent to see if you are covering all your bases. That is why they are on your team. It is good you are asking these questions to your self because you may be missing something and sometimes there just isn’t enough profit for the big guys. Get what you can but don’t worry about missing on something as you learn and grow.

[OregonLO]

as the people before have said you want to stick with the same people. They'll get to know you and be more likely to push to help you out with it. I'd probably try to save up some money or if you can convince some family members/friends/close associates to lend you money to help with the process that would be a great way to do it to. It'll really just depend for the banks, I'm not sure what they require out there. If you have a long term lease set up with the person who is already renting the property that you intend to buy I'm sure they'd see it as a safer investment to lend on.

[contentking]

thanks for your input, guys. Too bad I kinda went for a slightly better deal instead of the guy with whom it clicked a bit more, when comparing two lending offers of banks. Well... I guess I'm still somewhere at the beginning of the learning curve there...

[Cash Home Buyers _ com]

I assume that banks behave similar to US banks so here it goes.

I'd like to know when the next step should be taken. I've just bought my first property: do banks see me as different now?

Yes, they see you as having more liabilities and less savings, so therefore will be less eager to lend the next time, banks calculate risk based on risk factors and the more property you have the greater your risk for default, on average.


Are they still this lending-happy as before?

It's possible that you haven't reached any limits or extra barriers in their guidelines, and they may want the business.

Does this change the negotiation-strength for me (probably)?
Relationships will always help, but not much in the negotiation realm, unless you are dealing with a small bank that can make judgement decisions.


Does the fact that I do not have personal savings to bring in a new project matter?


Not good, but nothing should prevent a good deal to happen with the right structure and partners.



Should I appreciate my current investment (which, as I see it, is worth quite a bit more than I paid for it), and take it from there?

Not sure of the question, but i think the answer is yes


Or should I simply wait a year or so, rebuild my savings once more, and then proceed to find a new investment opportunity?


Yes, you should be patient, but never stop looking for deals as you can always make money of them if they are strong enough. More importantly, you should concentrate on learning this business and take your time as knowledge will more than make up for "lost" time with the right purchases below market.

All this considered the fact that opportunities are abundant in the country I live in.


There are always endless opportunities for those that seek.

Scott

[contentking]

Thank you Scott, for your insightful remarks. It's mostly what I thought the answers should be, but it's always nice to hear this from others.

Regarding the one question which wasn't that clear: By appreciating I meant re-evaluating it by a realtor... Not sure how this is called by the right term. I'm quite sure the property I've bought has increased quite a bit in value within a short time span. Should a new evaluation of the property by an external party (realtor or so; someone official) increase my chances of convincing the bank to lend more money to make an additional property purchase?


Thanks again for insights on this particular matter.

[tefariss]

If your investment is worth more than you paid for it, you can ask your lender for a line of credit and then use that for another project. Of course they may require an appraisal and they may only lend 80% of the appraised value. This works well with homes I've rehabbed and not sure about your "storage" investment.

Tom

[contentking]

Thanks tom! Now I also see which word i misspelled/misused: appreciate vs appraise :D

The appraisal is an option, then... thanks!

[Cash Home Buyers _ com]

It would help you if you had more equity in a property, but a bank will not and you shouldn't either factor that into your next purchase. The only way that equity can be of use to you is if you are able to get an equity line on the property and use the line to cover yourself in tight times.

Scott