Always a Plan B

I read through my entire blog last night, as I was bored and tired of playing Madden. One of the big lessons I learned last year is the power of Plan B. When your first plan fails, make sure to have another one ready. It’s one of the main traits of successful planning. As far as property purchases go, I may have to go to Plan B early.

Once I realized that I wasn’t getting the short sale property, I decided to look at all the other 4-unit buildings that I saw last year to purchase. The problem was that they are all gone! No one bought them, so I guess they took it off the market. The only 4-unit buildings that were still available were going for 92k to start! 92k?? I would have to save up at least 30k just to purchase it, and it would only yield me about $1000 a month after the mortgage is paid. Then I’d have to hurry and save another 30k just to purchase the next property, which would also yield only a grand after mortgage. Plan A worked because I would be buying 2 four-unit buildings for a cheap price, spending a little under 35k (down payment) for the pair. All the ones I wanted to buy were for under 75k so I would be buying low and getting maximum profits, the objective of any good investor. So unless two 4-unit buildings pop up before June, I’ll have to resort to Plan B.

Plan B will have me save 30k to purchase a big commercial property. There are currently 2 or 3 that are in my price range and they’ve been on the market for quite a while. All of them are in decent neighborhoods, so it really doesn’t matter which one I choose. If I can purchase one before the summer is over, I can save up and buy another big commercial property at the beginning of 2013. That would bring in well over 3k per month, which would keep me on pace to purchase a large property at the end of 2013 and retire from paycheck work as well.

The numbers are also in my favor. Sticking with Plan A with the new prices for 4-unit buildings would have me spend a little over 60k to get a total of 8 units and a profit of about 2k per month. Plan B has me spending the same 60k for a total of 12 to 15 units and a profit of at least $3500 per month. The only things I have to do now is to continue saving money and look for the best bank that offers the lowest down payments on commercial properties. The good thing is that many banks don’t base their approval of commercial loans on credit score. Commercial loans are based mostly on the earning potential of the property itself, as well as the ability of the owner to pay consistently over time. This means that I may no longer be forced to do business with SFS (Smalltown Federal Savings) Bank and their ridiculous 10.5% interest rate.

The only problem with Plan B is the learning curve. Acquiring property too fast with the little experience I have will definitely be an issue. I’ll have to continue reading books on managing commercial properties to get myself ready, while always looking at how I do business and making improvements when necessary. I would have had to learn about managing a larger number of units sooner or later, right? It might as well be sooner.