If you are considering real estate investments in general whether fix and flip or fix to rent for longer term gains there are some things you should keep in mind.
1) Treat this as a business rather than a hobby. Far too many investors do not take their investments seriously. This is a mistake because in this business time is money and every month that the house isn’t sold is a month that the house is costing you money. Create a plan, make a schedule, and stick to them both. CambridgeHomeLoan.com can help. During the financing phase the rehab schedules and financial information that we help you put together will assist in helping you plan for your fix and flip success.
2) Remember that this is a business. You are not investing in properties to make friends or seem nice. You are in this business to turn a profit. You cannot be timid about making low offers. The ability to buy low and sell high is the lifeblood of this particular business. This means that you are quite likely going to hurt feelings and make people angry (because they often place emotional prices to their homes that are simply not economically feasible). If you cannot deal with this reality then you are going to have some degree of difficulty gaining the high profits you are seeking. Nice guys finish last and you can’t really afford to do that in this line of work.
3) Pay attention to the market. This is vitally important. Many ‘flippers’ lost their shirts in the recent near collapse of the housing market around the U. S. The truth of the matter is that the indicators have been building for years. In cities where there was once a shortage of viable housing options there are currently surpluses. This does not drive the value of properties down so much as it brings them back to their proper values. Investors that were counting on an ability to sell above the actual value of the property were left holding the bag (or rather notes) on these properties for quite some time until they could be sold. Some never managed to sell these properties and were left dealing with the expense in addition to the costs of the upgrades. Do not buy in an inflated market (more on this later) if it can be avoided unless it is during the very beginning of the inflation (before property developers have the opportunity to create a surplus).
4) Do not allow it to become personal. Far too many first time house flippers decide to create a work of art rather than a business investment. It is tempting when making cosmetic and structural repairs to go ahead and create a dream home. The problem with this is that depending on the particular market you are unlikely to recoup the costs involved in doing so. The goal is to invest little and profit large. Granite countertops are lovely but not at all necessary in a neighborhood filled with those of humble means. Cater to the tastes and budgets of your target market rather than your personal tastes. You are better off being able to sell at market value or below than trying to shoot for that 1 buyer in a million.
5) Surround yourself with experts. Get to know the top real estate experts in your area. They understand the market best and can help you with valuations and even finding the occasional deal. Do not rely solely on 1 source. I have found many “local area experts” tainted. They have been around so long that they do not believe there are any values or any way to buy a house at a discount. Use their information and make your own decisions.
6) Find an area to work in and to focus on. There are tons of properties that have not been updated in 15 or more years. These will almost always sell at a discount. There are foreclosures, deaths, estate sales, tax lien sales, short sales, bank sales and tons of other ways to find discounted properties. Pursuing a few of these methods including working with local realtors to identify those desperate to sell will eventually result in a win. Using a private money resource like CambridgeHomeLoan.com will enable you to show cash and close fast. Trypical fix and flip deals can close in 7 to 10 days on your first deal and even faster on future deals. Having access to these kinds of funds widen the playing field. You can even approach wholesalers who typically need to close in under 30 days. Be careful with wholesale properties. Everyone needs to make a profit and the wholesalers are taking some of the profit off of the table upfront.
Despite the risks involved in flipping houses as a real estate investment there is no denying that fortunes have been made doing just that. Even in the current housing market there is a great deal of promise available to those who can do the work quickly and inexpensively. People still want to buy these lovely homes rather than buying a home that needs to be made over after the price of purchasing.