The birth and popularity of such TV shows as “Flip Men” and “Flip This House” have developed a culture of so-called real estate investors who believe they can successfully flip a house and get the big payoff. This is partly true, but there are rules to follow in order to avoid HUGE losses. Finding a junk property and turning it into a home is only part of the job –
Know Your Cost –
The very first aspect of investing to consider is how much capital you will invest. With real estate, it is much different than playing the stock market or buying bonds; you can either go all cash, or use mortgage funds to purchase property. Whichever you choose, be sure to know your out of pocket cost, and your projected gain when flipping a home.
Inspect, Inspect, Inspect –
You need to know exactly what you’re buying, and have a solid estimate of how much all repairs will cost. Some investors skimp out on having properties inspected, thinking they know a problem if they see it, but some problems are “under the hood” so to speak, and can leave you in the red if unknown.
Pick the Right Time –
Timing is everything, especially when it comes to real estate. Springtime and summer are high traffic times, and winter is a bit slower. Make sure you leave enough time for repairs and remodeling and know when you want to list it. Having a real estate professional by your side, helping with timing is a good idea when investing; they know the local market better than anyone.
Keep It Simple –
Some buyers might like shag carpeting and flamingo pink paint, but keeping the updates as basic as possible will help the property to appeal to a wider base of buyers. You want people to walk in and envision themselves moving in tomorrow, not thinking about things they will need to change. Keep things basic, and ask locals what they like in a home. What you like may not be the norm for the area, so find out what the local buyers are looking for.
Expect the Unexpected –
As with any investment, there is potential for loss, but you can protect yourself by leaving plenty of wiggle room. Make sure you allot over and above your expected remodel cost to account for any changes, mishaps, or unexpected repairs that may be needed in the process of preparing the property for resale. Inspections and solid repair estimates can definitely keep the possibilities for unforeseen costs to a minimum.
Have a Team –
In this process, you will need people around you that have specific jobs and duties. The real estate agent needs to be a part of the process to make sure the remodeled home will appeal to buyers in the area. The contractor will need to be constantly vigilant to keep a tight schedule. An accountant or bookkeeper can keep track of costs and alert the team if things are getting to expensive. The main investor, or investors, needs to oversee all of them, and make sure the timeline and budget stays intact. Work together. Never over extend yourself and delegate as needed.