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You have in mind how much you want to profit when considering an investment property. Whether it’s a quick fix & flip or a longer-term deal, like a buy and hold, you still need to have a certain profit number in mind. Do you account for everything when determining how much to offer to yield at least a $20k profit? Do you look at all the taxes? Can you adequately estimate repair and contractor costs and understand how much you should put down versus borrow?
One of the BIGGEST mistakes people make when fixing and flipping houses is deal analysis. Learn to make a sound deal to set yourself up for success.
It’s easy to be optimistic, emotional, and unknowing when doing your first real estate rehab deal. However, even with a complete inspection from the beginning, you always need to add a buffer to your costs. It would be best to account for contingencies, as you never know what might surface (hundreds of investors understand this tale all too well).
Your projected repair costs are rarely ever too high.
When you learn to assess repair costs rationally, and in a business-like manner, your first flip will bring you fewer surprises.
Keep in mind that you are spending money to make money. You’re not spending money to see your dream home come to fruition, only selling it to someone else. Therefore, it doesn’t make sense to choose the flooring YOU like best or the landscaping you would have, especially if it means more money spent.
Real estate investing isn’t about extravagance but profit. So spend money ONLY on the deals that make sense and not the ones that have somehow pulled at your heartstrings.
You can enjoy the process and have fun, but real estate investing should be data-driven. Therefore, going into your first deal with this thorough understanding is necessary.
You may think adding a second story or a complete kitchen remodel can boost your ARV and maximize your profit.
Do NOT give in to this temptation. You cannot count on the market consistently appreciating. Ignoring your original ARV can eliminate your room for profit if the market shifts.
The faster you flip, the quicker you pay back your loan, earn your profit, and move on to your next profitable real estate deal. The most time-consuming elements of the process can include hiring contractors, getting contractors to complete the project on time, and even selling your home.
You must know how to manage your project from start to finish. Your comfort level with negotiating and project management will ensure the profit you expect.
What sells in that stucco subdivision you grew up in may not trade well in your up-and-coming neighborhood across the county. However, some trend analysis in the community you want to invest in will go a long way in making you an expert. You can do this by attending a few open houses, doing some slow neighborhood tours, and becoming best friends with websites like Zillow, Realtor.com, or Trulia.
It’s a hot time for the housing market, and contractors are using this opportunity to boost their prices on unsuspecting real estate rehabbers. Do you know what costs you should expect to pay? You need to.
Contractors can also be guilty of belaboring the process. Delays like this will extend the time it takes for you to receive your paycheck, and it will decrease the size of your earnings (i.e., more interest paid, increased time between flips, etc.). You must learn how to supervise and manage contractors so they work on your timeline, and you aren’t working on theirs. This single skill will catapult you faster toward being a successful, repetitive flipper than most other traits.
Even if this is your first fix and flip, no matter how much education you have.
You will be a mix of nerves, stress, excitement, and passion. But, no matter how much you know, you still won’t have the experience until you complete your first project from start to finish.
Don’t let fear stop you, either. You won’t be the expert your first time out. But, hopefully, you can feel comfortable and confident enough in your knowledge to know you can make even your first deal an incredible success.
We provide options at Alternate Funding Solutions to help you along this process. We are not just a funding source; we want to help educate you and guide you so you will have a positive and profitable investment. Ready to jump in and do it all over again. Let us help you build your investing empire.
To learn more, give us a call today, and we’ll be happy to review your latest project with you. (800) 366-WIN-1, that’s (800) 366-9461
