Television infomercials about flipping properties focus on success. They tout independence, wealth, and financial freedom as the almost inevitable result of this type of real estate investment. While independence, wealth, and financial freedom are the rewards of a successful career in flipping properties, not everyone has success. What you don’t see on television are the many sad tales of promising flips gone wrong. These stories encompass losses that range from only breaking even to losing a portion of your investment capital to losing your shirt.
The more epic tales of woe often involve financial hardships that follow those who fail at flipping one or more properties, and concern their desperate work to recover from heavy losses. The snowball effect of a bad flip is a subject television likes to ignore.
If you are planning on flipping properties as a real estate career, it is a good idea to take steps to learn as much as you can about this area of real estate investment before you take the first step toward purchasing an investment property. Remember, your goal is to be listed among the success stories. Being a success in any field takes a great deal of proper planning.
Being a success in real estate requires you to devote a considerable amount of time to studying and planning, investigating properties, learning about prices and property values, choosing one or more likely areas in which to invest, and seeking counsel from experienced real estate investors, inspectors, real estate agents, and real estate attorneys. You must understand the process of flipping properties as well. Months of planning should go into your first property pick in order to lower the risk of failure and greatly improve the odds of success.
While you are doing all that learning and planning, you need to build up a cash reserve to finance your first efforts. Going into debt for your first flip is the biggest mistake new real estate investors make, and it often costs them their real estate career. If you can’t manage a personal budget, the chances of your managing a business budget are pretty slim.
Another good idea in your quest for success as a real estate investor is to be realistic and avoid great expectations. With your first flip you will be lucky to turn a profit at all. A first flip is successful if you break even or make a small profit. If you are dreaming that you will make more money on your first flip than you made last year as a full time employee, you might need to lower those expectations. Monetary success will come, and may come with a rush, but it seldom comes with that first flip. The first flip rarely goes as expected.
Remember that financial investment nest egg you are saving? Plan on setting aside at least twice as much money (preferably three times as much) as you think you will need to pay for the work on the property you are planning to buy in order to cover the actual costs. There are inevitably tools, permits, supplies, and labor that the novice property investor doesn’t plan on, as well as the tendency to seriously underestimate the cost of the materials that will be needed in order to get the job done. If you don’t have the money to cover those unexpected expenses, you can sink in a hurry. Do your calculations, and if you find you don’t have enough in your nest egg, walk away from the deal. Walking away will be your first success.
Did we mention that you have to plan everything? It bears repeating. Even after your investment is secured and work has started, you must continue to plan.
Every day’s work needs to be fully planned before you show up at the property. You will soon learn that your most important skill at this stage is investment property management. Investment property management, even when it concerns one small rental investment, is a full-time, hands-on job. When you arrive at your investment property, you need to know who is going to be on site that day and what job is your top priority. It also helps to have an alternate plan for those days when your first plan doesn’t materialize. Be sure to have all the materials you need on hand, from tools and supplies to lunch and bottled water. Trips to the hardware store, lunch breaks, and coffee runs quickly kill a day and the day’s productivity.
Success stories are just as possible in real estate investment as those hard luck tales of failure. Success stories are built on planning, budgets, organization, education, and realistic expectations. As you gain expertise in all these areas, your real estate investment business will grow, and you will be well on your way to independence, wealth, and financial freedom.
Everyone who decides to go into flipping properties has dreams of being the one to bring home the big one. You know, that really huge success story about how you made more money in three months of working on a house than you and your spouse together made last year at your regular jobs. The sad truth is that very few flippers ever find a flip that good. Even those lucky souls who find an excellent flip almost never manage it in their first few investments. If you know you will almost certainly not make your fortune on your first few ventures into flipping properties, you’ve got your feet firmly planted in the sometimes harsh soils of reality.
Flipping properties is one form of real estate investing that has received a lot of media attention in the last few years, and is currently a favorite subject of many late night television infomercials. If you have managed to avoid these shows, you are in a much better position to tackle your first flip than people who do watch them and come away with a false sense of confidence about the ease with which a real estate investor can make substantial profits by flipping properties. While the profits exist and can be much higher than most people might imagine, the average first timer doesn’t see those good profits very often. You have to pay your dues to realize that great income.
Most first time flippers make rather slim profits when you take into account the tremendous amount of work that goes into flipping properties. It is a good idea to take care to price your flip appropriately. If you can make ten thousand or more on your flip after all expenses are paid (including taxes, realtors, and any fees) you are doing exceptionally well and should be congratulated.
Property investors who build too much of a profit margin into the asking price often find they cannot sell their investment property. They watch with despair as the carrying costs go through the roof, eventually lower their asking price to a realistic level, and discover that their misplaced profit expectations have denied them any profit at all. Your profit margin has to match the intrinsic value of the investment property coupled with its location. It is also better to determine your profit as a percentage rather than as a flat dollar figure. Then look for a 10%-20% return on your investment, not an unrealistic 50%.
Even with a reasonable profit margin in mind, the successful property investor must be flexible enough to negotiate the price with a potential buyer. This is the point in the transaction where many property investors loose buyers and find themselves sitting on their investments month after month, losing money. If your carrying costs are $2,000 a month, it is worth the sale to take $2,000 less on the price. The whole point of flipping properties is to move them quickly and not end up with an inventory of houses. A small but reasonable profit is infinitely preferable to any sort of loss.
Turn your house flip into a success story by spending as much time in the planning process as you spend in the entire labor process of repairing and reselling the house. If you make a viable business plan and budget, and, more importantly, if you refer back to your business plan and budget as your project moves forward and follow them religiously, you will find that you are in a much better position to welcome success.
When it comes to flipping properties, success stories abound, some of them wildly exaggerated. Be cautious in your optimism when it comes to flipping properties, but plan for reasonable profits that will increase over time as you gain experience and knowledge about this very exciting type of real estate investing.
Aside from the obvious financial rewards that go along with real estate investing and flipping properties, there are some abstract benefits to be gained as well. These benefits are learned in the process of flipping properties and can often be applied not only to real estate investment in general, but also other areas of your life.
1) Budgeting. There are few things that can give you a crash course in budgeting quicker than flipping an investment property. In order to successfully flip a property you are working on, you will need to learn to budget quickly or you will wind up hemorrhaging money. Determining profit margin and measuring that against ongoing expenses can help you weed out unnecessary expenditures in order to safeguard your profit. This skill is easily applied to your personal finances as well, allowing you to spend your money wisely and to live within your means. As you progress in real estate investing and budgeting, you will find that those means increase.
2) Muscle Definition. Who knew that flipping properties would be such an excellent workout? This is especially true for those who traditionally hold jobs that aren’t dependent upon physical labor and who end up doing much of the work themselves. First time flippers are often surprised to find themselves engaged in heavy lifting, hammering, and a myriad of other physical jobs as they get their investment properties ready to sell. Not only will your physical health improve, you will find that since you save profit-eating labor costs by doing the work yourself, your profit will be healthier at resale as well. And don’t forget emotional health. All that work can give you a greater sense of job satisfaction as you take an active part in making your project come together.
3) Attention to Detail. Attention to detail is a huge benefit that comes from flipping properties and you will get better at this with every subsequent flip. Money is often made in the details that others overlook, such as new electric faceplates, proper staging, and a good eye for color throughout the property. These details freshen a home and make it inviting. Potential buyers see a home that is loved and cared for rather than just another house on their list of places to see. It makes it easy for them to imagine living there. Making attention to detail a priority in other areas of your life, such as your employment, tax preparation, event planning, or cooking, will surprise you with its ability to boost quality and satisfaction in job well done.
4) Positive Thinking. Positive thinking is a powerful tool. There are very few places that this holds true more than when it comes to flipping properties. You definitely want to season your positive thinking with a nice hefty dose of reality, but you should also be aware that thinking positively has many benefits to both when flipping properties and in almost every other aspect of your life. Nothing drains energy like dwelling on problems or rehashing mistakes. There is a difference in learning from problems and mistakes and in obsessing over them. A positive thinker says “Great! I won’t miss that next time.” The negative thinker says, “I can’t believe I did that. I’m just no good at this.” It takes little imagination to guess which person will last in the real estate investment business.
5) Just Do It. The old Nike commercials had a point. If flipping properties doesn’t teach you anything else it should teach you this lesson. Procrastination wastes money. Every day that you carry that investment property you carry its expenses (electric, mortgage, interest, etc.). Get in there, get it done, and move on to the next project. Putting off distasteful tasks won’t make them go away, it just makes them harder to tackle. The application to other areas of your life is easy to make: do that research now, gather your tax records in January rather than April, plan your retirement before your retirement plans you.
Flipping properties isn’t terribly complicated, but it does take a unique combination of luck, skills, and stubbornness to turn a profit in this particular business. Learning the lessons in this article will help you succeed not only when it comes to flipping properties but also in other aspects of your life as well.
If you’ve seen television infomercials touting the profits to be made in flipping properties, you may be intrigued with the idea. You realize that you’d love to get in on this market and you wonder how much of what you’ve heard is true. Can you make a living at flipping properties? Can you make a fortune? Below are some tips that will help you succeed if you decide to become a real estate investor. Some of them pertain to all areas of real estate investment, and some are exclusive to flipping properties.
1) Guard your reputation. This tip applies to any area of business, but it is especially important in real estate. It is true that your reputation precedes you, and it can pave your way or become a major stumbling block. You know how you feel about a workman who has the reputation for shoddy workmanship, shady dealing, and unreliability. When you are looking for someone to do a job, you won’t call this guy. Your good business reputation in real estate investment will attract financing, experienced partners, and buyers. A bad business reputation will keep all those people away and can end your real estate career. You can create a positive reputation for competence by doing things the right way, following the suggestions below.
2) Find an investment property in a suitable location. Regardless of the deal you get on an investment property, if it is in an area where properties are not moving you may end up owning the house for months after repairs are completed, with your money tied up and carrying costs eating away at your profit margin. In addition, you want to choose a neighborhood where realistic prices will give you an acceptable profit at resale. If your investment property is priced at $20,000 above average for a neighborhood, it is going to be a slow sell, if it sells at all. Finally, you want to be sure that your house is similar to other properties for sale in a neighborhood. A two-storey, six-bedroom house can be hard to sell in a retirement neighborhood.
3) Have an inspection before you buy. There is no way a flip can be successful unless you buy a property that is essentially in good shape and you buy it at a rock bottom price. Your investment property should never need more than modest repairs and cosmetic touches to sell. Your inspection can tell you if this is the case. You can either adjust your bid in order to cover the costs of those repairs or you can pull out of the project all together. Remember, unanticipated repairs or costly repairs will eliminate your profit margin and can delay the resale of your property.
4) Before you improve a property, decide what is necessary. It is best to salvage as much of the original structure as possible and make mostly cosmetic repairs to an investment property you want to flip. The goal of a flip is to spend a little and make a lot, with the quickest turnaround time possible. Plan projects that can be completed quickly (carrying costs are the bane of the house flipper) and with minimal expense. Choose projects that make an immediate impression, such as flooring, paint, and resurfaced (not replaced) fixtures.
5) Get the work done. Whether you are doing the work yourself or hiring experts you need to get the work done as quickly as possible in order to maximize your investment income. Plan projects to move quickly and avoid projects put everything else on hold while they are being completed. Getting the work done can be stressful and you can be tempted to settle for inferior results in the interest of time. Remember that business reputation! If you do the work, do it well. If you hire a contractor, hire one who has a business reputation you trust.
6) Be flexible with the price. If you stick to your budget, you should be able to go with your original targeted asking price. You do not want to price your investment property at more than the neighborhood will support and you definitely want to avoid turning away potential buyers by turning down a fair offer too quickly. It is better to take a lower offer and sell the house quickly for a smaller profit than to hold out for a larger offer that never comes. As long as you own the property, you will be paying carrying costs. Quick turnaround is essential for good profits.
Flipping a house can be a trying ordeal and is not for everyone. Many a first time flipper has decided in the middle of the project that he or she isn’t asking for nearly enough money out of the deal. The hours are long and the work is difficult, but for the right person it can be quite satisfying. If you stick to your plans and budgets, continue to learn and gain experience, and weather the inevitable setbacks, you will find that your hard work pays off. Flipping properties can bring you investment income that is quite attractive by real estate investing standards and bring that income fairly quickly. While the work of flipping properties is difficult, the payoff in job satisfaction and excellent income makes it worth the effort
When it comes to real estate investing, flipping properties can be a bold and rewarding move. It can also be a daunting idea for first time real estate investors. If you decide to pursue this type of real estate investment, you can minimize the risk while maximizing the investment income potential by following a few guidelines.
1) Have an inspection. For whatever reason, some first time property investors buy their investment property without ever having it professionally inspected. This mindset can lead to disaster in a hurry. Termites in the walls, a faulty foundation, bad structural supports, bad wiring, all cost much more than you ever want to invest in property flip, and none of the faults are obvious to the naked eye. An inspection won’t eliminate unexpected problems (every property has a few surprises for even the most experienced property investor), but it will steer you clear of properties that are doomed to be money pits.
2) Establish a budget and stick with it. Successful people who make their living flipping properties plan a budget. Budgets help you measure your progress and ensure that you don’t lose track of expenses. They also measure your project income and your overall investment income. All successful real estate investors budget because they all know the advantages. Unfortunately, you may need a lot of determination to actually stick to the budget you establish. It is a good idea to leave a little wiggle room in your budget for unexpected emergencies, but be firm on the spending limits for specific projects. If you go over on those projects, you will have to eliminate something else in order to realize your profits.
3) Consider the target buyer when making repairs an upgrades. You must understand when purchasing an investment property to flip that you are buying the house for someone else. With that in mind, you will make repairs and improvements based on the items your target buyer will demand and expect and can afford to absorb in the sales price. A common first-time mistake is to renovate a house to please yourself, rather than your target market, only to discover at the end of the day that you have a beautifully renovated home no one in that neighborhood can afford to buy.
4) Remember to be flexible on the asking price. Flipping properties is a for-profit business and your first goal should be to make that investment income. However, although every property investor sets a target profit margin, it is never set in stone. Don’t refuse to consider offers that will net you a profit just because the profit isn’t as high as you may have envisioned. A house sitting empty on the market accrues carrying costs and is ripe for all manner of disasters. You want to get in and out of every property as quickly as possible in order to free up your capital for your next project. The key to flipping properties is turnover. Entertain all offers seriously even if they aren’t what you were hoping for. You never know when it might be the best you’re going to get.
5) Don’t take it personally. A home is a very personal thing to most people. You will work long and hard to select colors, materials, flooring, etc. and you will be attached to your choices. However, not everyone is going to share your tastes. Do not alienate potential buyers by getting angry because they do not appreciate your hard work. It may sound ridiculous, but deals can go bad over matters of taste when the property investor allows emotions to surface. It happens a lot more than you might think when flipping properties.
6) Spend as little money as possible while making high-impact changes. Spending a little while making a big impact is the best way to maximize your investment income. Your changes should be visible and effective. Don’t overlook the value of curb appeal! In order to get buyers inside the home to see your improvements, you have to get them past the front door. A neat yard, a pot of flowers, tidy and uniform window treatments don’t cost much, but they give the impression of a home that is well cared for and are extremely effective in attracting buyers. Once inside, make sure each room is clean and bright, and focus your creative energies in the bathroom and kitchen. Re-facing surfaces, neutral colors, attention to detail (did you put in new switch plates?), and some staging are cost efficient ways to appeal to your buyer.
Little changes result in a huge improvement in the perceived value of an investment property. Make the repairs necessary to make the home safe, first. Then repair and upgrade as necessary to make the home appealing to your buyer. Together with a reasonable profit margin, these steps will ensure that your investment property sells quickly and brings in the best possible profits.
Money management during any real estate investment venture is an essential skill. Your first flip is a great training ground for money management. When you are inexperienced in real estate investing, you don’t fully realize how much things cost, how quickly expenses can mount up, and how often you can encounter expensive surprises in your investment property. It is easy for the budget on a house flip to get completely out of control. For this reason you need to take control of your financial situation from the very beginning.
Begin by establishing a realistic budget for the entire project. If you find yourself spending more money in one area than you had originally planned, you need to modify your initial budget, either by planning to add capital to the project or by making cost lowering adjustments. Be careful you don’t adjust yourself out of a reasonable profit.
In order to have a firm idea of the cost of projects you plan to tackle, both big and small, it is a good idea to price labor costs, project costs and even take a walk through a hardware store to get a firm grasp of today’s prices on the hardware, equipment, and supplies that you might need to complete the job. Make a list of these costs and then tally the price for turning your investment property into a marketable property.
Use contractors when necessary, but sparingly. There are times when it will cost much less to use a contractor on a project than to muddle through on your own. There are also times when local laws require a contractor. Do your best to avoid labor costs for jobs you can do yourself. Successful real estate investors never spend a penny on a flip that they don’t need to spend, and labor costs are a huge budget buster.
Get permits first and up front. Time is money when you are flipping a house and once you start the work that time is precious. Make sure you have all the permits you need and that they are paid for before you begin the project. That will help you finish your project on time and on budget so you can take advantage of a quick turnaround.
Make it a habit of accounting for every penny spent throughout the day at the end of every day, especially when you pay in cash. Only by knowing where your money is spent can you have a solid grasp of how well you are controlling costs and whether you are staying in budget with respect to each aspect of your project. You also want to keep track of how quickly you are spending money relative to completion time. If you are spending money too fast up front, you may not have the money needed to take care of the small details that crop up toward the end of your renovations. It is often the small details that sell an investment property.
One huge way to better manage your money during a house flip is to make a conscious decision and consistent effort to work according to your target market. For example, a lower income community cannot absorb the costs of granite, marble, and hardwoods in most situations so don’t go to that expense. On the other hand, if you are working in a more upscale neighborhood where property values are higher or are increasing, you may have to make more upscale improvements to make your investment property competitive. However, chances are quite good that, especially the first time you make this sort of real estate investment, you will be working on a house for those who do not have the financial means than you may have. Be sure to keep your project within the budget of your buyers.
In order to turn a solid profit when flipping properties or when doing any type of real estate investing you absolutely must have a firm grip on your money. You must know what your overall plans are for your capital and you must keep track of it as you spend it. Obviously the less money you spend, the more you stand to profit on any real estate investment. The best rule of thumb is to spend the money you need to spend in order to improve the value of your investment property but to avoid unnecessary expenditures that will price your home out of the market or which don’t impact to the investment property’soverall perceived value.
Flipping properties is becoming big business in the world of real estate investment. If you plan to make a good living by flipping properties and if you want to build a good reputation as a competent real estate investor in your community, be sure to follow these helpful tips.
1) Do what needs to be done. Don’t cut corners and create situations that will put the family that purchases your investment property in personal or financial risk. You want to create a safe and pleasant home for the family or person that ultimately makes the purchase. You do not accomplish this by taking shortcuts and using shoddy workmanship. Your reputation is priceless. Protect it.
2) Avoid spending money that doesn’t need to be spent. Don’t create spending opportunities! Many people do this by deciding to tackle additions, rip out walls, or change floor plans. These kinds of changes are best left to the buyer unless they will significantly improve the asking price for your investment property. Rather than making the house live up to its complete potential, spend the bulk of your money in improving kitchens and baths, the two rooms most likely to sell a house. Limit yourself to cosmetic repairs that make those rooms clean and inviting. Substantial updates will cost you money you won’t be able to recover.
3) If it ain’t broke don’t fix it. There is a lot of wisdom in this old saying. There is no reason to go in and fix something in your investment property that doesn’t need to be fixed. For example, don’t add expensive tile to the floor or crown molding to the ceiling. If there is nothing wrong with it, leave it alone. Every penny you spend ignoring this advice will come right out of your profit margin.
4) Always work within a budget. Most people set a budget when planning to flip houses but very few manage to work within that budget. Make a budget, write it down, and then refer back to it, at least weekly. Make yourself sit down and enter all your expenses as they occur. Keep an eye on the budget and if you think you are at risk for exceeding it, make adjustments in your spending if at all possible. This is the difference in making the profits you anticipated and putting the entire project at risk. Learning to budget takes some experience, but using a budget will ensure your long term success as a real estate investor.
5) Create a home for your buyer, not you. Finding and renovating a home that your potential buyer will want to live in is not necessarily the same thing as finding and renovating a home that you will want to live in. You should never design a flip according to your tastes; it is a recipe for disaster in more ways than one. First of all, it often raises the price you must seek for your investment property in order to cover the increased costs of decorating and designing according to your taste. The increase in price is likely to price the home beyond the capabilities of your potential buyers to afford it. Second, you are liable to discourage buyers when they see a home containing too much of your personal taste. If they don’t share your taste, they have to take out all the cherished details you added. Simple changes are best. Finally, you tend to be too emotionally involved in a house you have designed to your taste, and you tend to have spent far too much time on the project. Your goal is to buy, fix up appropriately, and sell, as quickly as possible.
6) Time is money. Remember this in all things. The more time it takes to flip your investment property, the more money it’s going to cost you and the less money you are going to make. Plan small changes that have a big impact and can be done quickly to get the most out of your flip.
7) Never attempt a champagne flip unless you have a champagne budget to back it up. Just as flipping above the market is an unwise move, it is equally unwise to flip a property beneath your target market. Do not attempt to flip a house in an upscale neighborhood if you can’t manage the upscale building supplies and appliances that will be needed in order to make it attractive to potential buyers in that neighborhood.
While these tips aren’t guarantees for success, they are solid advice that will minimize the risks you face when flipping properties.
Can you combine the dream of real estate riches together with a desire to help people? Absolutely. Everyone needs a place to live, and everyone dreams of owning their own home. There are always good people out there who have hit a few financial bumps along the way and have fallen on hard times. You can help them and realize good rental investment income for yourself by purchasing investment properties with the goal of working out a lease to own agreement with your tenants who want to purchase the place where they live, but cannot get other financing.
This type of real estate investing has benefits to you in addition to allowing you to help out your fellow man.
Tenants have no ownership stake in the property they rent. For this reason, tenants are notorious for having little regard for damage done to residential investment property other than how it affects their security deposits. Those who have hopes of someday owning the property in which they now live will be much more inclined to take better care of it. Even if they never end up owning the property, the fact that they have cared for it while living there means you will have fewer and less expensive repairs to make after they have terminated their lease. Your investment property might even increase in value during their tenure.
Lease to own properties are often in high demand and will fill up more quickly than the average rental investment property if the sale of the house should fall through for some reason. An empty rental investment property is a financial drain, so the fact that you will not have to wait long for new tenants is an added financial safeguard. Common reasons for sales falling through are work related transfers, divorces, and an inability to get financing even with money escrowed for a down payment.
Benefits to this arrangement for the tenants are many. You will be helping them save for their down payment by putting a predetermined portion of each month’s rent in escrow to be applied to their down payment at the end of lease term. This allows your tenants to save the money for the down payment without really consciously thinking about it each month. This arrangement also allows them a little more leeway for painting and decorating the property to their taste and making non-structural improvements, none of which would be possible for them under a standard lease agreement.
Another big benefit to for your tenants is that leasing to own gives them a certain amount of time, typically two years, to get their affairs in order, improve their credit, save money, and take other positive steps toward their dream of home ownership. Your tenants also have the opportunity to see how they like living in the home in question. Many prospective homeowners would love to have a two-year trial period before making a final commitment. Having the opportunity to learn about neighbors, local schools, local commute, shopping, and entertainment lets your tenants make an informed decision about buying your investment property.
The long lease period is also beneficial to you, since it keeps the investment income flowing without endangering your capital investment. In addition, should the purchase not take place, the escrowed money will revert to you.
Some property investors have a difficult time making the decision to go the lease to own route when it comes to real estate investing. They believe that lease to own terms take advantage of people with shaky financial backgrounds. Their thinking is that it will be difficult, if not impossible, for people with bad financial histories to turn their finances around in two years. However, it is also true that lease to own is a service that can be a huge help to those who are experiencing a financial rough patch but otherwise have sufficient money management skills to pull themselves back on track. There are lots of good people who just need a break to make good. Your part is to offer a fair price and make a fair lease arrangement with your tenants, so that this arrangement will be mutually beneficial.
All new things can be a little frightening or intimidating at first glance. This is definitely true when it comes to flipping properties. Many people feel several times during their first flip that they have gotten in over their heads. The truth is that it will take more than a few flips to feel comfortable with the process. Most people make very little, if any, real profit on their first flip. Real estate investors who eventually succeed at flipping properties write off those first few flips as learning experiences and keep on with a positive attitude. Learning the ABCs of flipping properties can help you avoid costly mistakes often made by first time flippers.
1) Appraise. You need to have a proper appraisal performed on the house you intend to flip and compare it to other houses in better condition and of similar size and style within the neighborhood. The appraisal should reveal the actual value of your prospective investment property compared to its asking price. You can then talk to the appraiser for advice about a realistic selling price after you have made minor repairs and cosmetic upgrades. As a general rule, you do not want to buy the best house in the neighborhood! In fact, it is best if you can find the neighborhood eyesore to restore. With less time and money, you can usually turn that house into a neighborhood competitor and make a profit. However, the appraisal will tell you what your profit is likely to be.
2) Bold Moves. Sometimes it takes bold moves to make a dream come true. The decision to flip houses is a bold move. Although you want to be prudent in your investment decisions and you do not want to enter into overly risky waters, you also don’t want to play it too safe. Do your homework, be cautious with your financing, and guard your profit margin by adhering to your budget, but most of all take action. Buy an investment property, rehabilitate it and sell it, learn from your mistakes, and then buy another. Only with the boldness to continue in flipping properties will you gain the expertise to realize the substantial profits that can be made in this type of real estate investment.
3) Can do Attitude. A “can do” attitude is similar to being willing to make bold moves. You absolutely must believe you “can do” what it takes to be a success in flipping properties. Flipping properties is not an undertaking for anyone who is easily discouraged. If it were, the opportunities wouldn’t be so plentiful because everyone would do it. As is true with all businesses with great income potential, flipping properties takes quite a lot of effort. That “can do” attitude will take you right over those initial hurdles and keep you on track. You will need to stand up to your contractors, inspectors, and even some vendors in order to get the best price and the most bang for your buck. Believe in yourself and what you are doing and you will get the job done. A “can do” attitude does not mean ignoring the advice of more experienced real estate investors, inspectors, appraisers, and real estate agents. It does mean forging ahead and knowing that as you gain experience there will be nothing you can’t do.
4) Determination. You must be determined to see your project through to completion. It takes a certain sort of pigheadedness to get through the first few flips. It should be stated here that flipping properties is certainly not an easy way to make a living. It does have the potential to be both a highly profitable and a highly satisfying way to make a living. If you want those profits and that job satisfaction, you are going to need to push yourself out of bed even on those mornings when you feel as though you simply can’t look at one more investment property. It’s the quality you must have when your family and friends tell you you’ve lost your mind. It’s the quality that will ensure your success.
5) Excitement. Excitement, anticipation, and dreaming big. These are all essential ingredients for successful property flipping. Some days they may be in short supply. When that is the case, work on recapturing the excitement of the hunt for that great deal, the anticipation you feel when seeing an investment property’s potential, and the dream of financial success. Picturing these things each morning before you start your day’s work will alert you to the good things that come your way and will sustain you when the plumber brings bad news.
We’ve only covered the first five of twenty-six topics in our review of the ABCs of flipping properties and real estate investing but you get the idea. Do it, learn from it, and do it again. Success comes to those who learn and persevere. Good luck!
While many people have dreams of enjoying the bountiful profits that can be made from flipping properties, very few of them put as much effort into deciding how to make that dream a reality. Success in flipping properties requires that you know what to do and what to avoid as you make this type of real estate investment. The following are a few things you absolutely must do in order to successfully flip a house and thus begin your ride on the road to real estate investment riches.
1) Do Make a Plan. Plan your strategy carefully before you begin, and commit your plan to paper. You must treat flipping properties as a business, and all businesses must have a written business plan to succeed. Once you have made a plan, keep it in front of you, and refer back to it periodically. A business plan is not static. You will adjust it as you go, making note of the areas that are working satisfactorily and other areas that need change or improvement.
2) Do Make a Budget. Establish a budget for the entire project and, again, commit it to paper. You have to know how much money you are willing to put into an investment property for its purchase and for repairs and renovations. You need to know how much profit you need to make on a property for it to be worth your time and effort, remembering that flipping properties is work intensive. Once your budget is in place, you need to measure the potential investment properties you find against your budget. Once you purchase an investment property, you need to consult your budget often to make sure you are staying within it and not eating up your profits. No budget is static. There are always unexpected expenses and unexpected profits. As time goes on, however, you will get better at anticipating both costs and profits.
3) Do Have a Property Inspection Before You Buy. This is the single most important “do” on this list. A professional property inspection can save you a great deal of time, money, and heartache. Walk away from any potential investment property, no matter how low the purchase price, if the inspection determines that it is structurally unsound, has a bad foundation, or needs new wiring. Any major expense will decimate your profits because you simply won’t be able to recover the expense in the sales price. Limit yourself to minor repairs and making changes that people can see. Selling a safe, attractive home is your goal, but you want to purchase investment properties which are sound enough to ensure your goal is realistic. Ignoring this advice can trap you in a real estate investment money pit.
4) Do Investigate the Neighborhood. Get to know the neighborhood where you plan to invest before buying. Make sure the investment properties available in that neighborhood actually fit the needs of the neighborhood. Flipping properties is the art of finding and selling properties that appeal to the people in the neighborhood you are working, not those that necessarily satisfy your personal tastes and needs in a home.
5) Do Remember Your Primary Goal is to Make Money. When you start flipping properties you will soon find that you have poured blood, sweat, and tears into every investment property you purchase. Even though you may put a high premium on all that effort, you have to place realistic expectations on how much you stand to earn from your efforts. If your asking price is too high, your investment property will stay on the market too long, and you will lose money. Choose soundly constructed investment properties into which you can put a reasonable effort and which you can offer at a price consistent with other neighborhood properties while still making a good return.
Take a moment to reflect on the fact that many beginning real estate investors lose money on their first venture into flipping properties. Don’t be discouraged! Every investment will teach you valuable lessons you can carry with you into future flips. You will make more profit each time you invest, if you follow the tips given here and learn from your mistakes as you go.