Whether this is your first foray into flipping properties or whether you have been flipping properties for years, the following “don’ts” can save you time, money, and aggravation.
1) Don’t Think the Neighborhood Doesn’t Matter. Don’t forget to check out the neighborhood before you buy. Make sure the investment property you are considering is a good fit for the neighborhood and that the neighborhood is a good fit for the investment property. Buying a largest house in a neighborhood can price you out of that market and make it difficult to sell at a good profit.
2) Don’t Ignore Your Budget. Don’t blow your budget without just cause. Your budget is what you used to determine your profit margin. That margin can be quickly eaten away when money you spend on a property cannot be recovered at the time of sale. The goal in flipping properties is to get in and out of the investment quickly, having made only the repairs and upgrades necessary to sell your investment property.
3) Don’t Forget to Set Goals and Keep Them. Don’t forget to set daily, weekly, and monthly goals and hold yourself accountable to those goals. If you don’t reach your goals for the day, you can derail your momentum and seriously delay the completion of your project. When any goal is unmet, you may find you have to rearrange any number of other contingencies, resulting in delays that can cost you both time and money.
4) Don’t Neglect Curb Appeal. Don’t neglect the exterior. Curb appeal brings buyers to the property and gets them inside. Unless you bring your potential buyers inside your investment property, they will never see the improvements you have made to the interior. In addition, a buyer is in the market for the entire package. A home that looks run down on the outside leaves the impression of overall neglect, and many potential buyers will never walk inside if the outside looks forlorn.
5) Don’t Make Unnecessary Upgrades. Although it is necessary to improve a property and make necessary repairs, you should never spend money you don’t need to spend. Granite countertops look great, but this is money that won’t be recovered in the sale, particularly in homes that are in marginal neighborhoods. Important upgrades are those that make the property look neat, clean, and inviting, such as good quality interior paint, window treatments, resurfacing bathroom fixtures rather than replacing them, and putting in new cabinet doors or hardware rather than replacing cabinets. In other words, salvage what you can, fix what needs to be fixed, and add a few cosmetic touches before moving on.
The financial industry greats will be the first to tell you that real estate investing has the potential to bring in serious profits. They will also gleefully inform you that the risks in some cases far outweigh the potential, especially if they are cautious investors. But those who have made their fortunes in real estate investing will tell you that this business is worth every ounce of risk. They will also tell you that experienced real estate investors make it a point to minimize risk wherever possible.
The commercial property investment market, while requiring a higher rate of financial commitment, is generally not as volatile as the residential investment property market. However, the risk is as high as your financial commitment. Therefore, it is wise to choose your investment and your investment partners, if any, carefully.
Commercial real estate investing is different than traditional residential real estate investing, in terms of capital required, financing, project management, and investment partners. It is a good idea to do a lot of research before jumping into this market. Commercial property investment can take on many forms, from strip malls and large enclosed shopping malls, to business and industrial complexes, to sky scrapers and high rise condominiums.
Unfortunately, beginners often find the path to commercial real estate investing laden with thorns. You will need to make a larger financial contribution to fund your commercial real estate projects. It is therefore a good idea to find a group of fellow real estate investors to come together on the project in order to share the financial burden, the project management, and the risks. Working as part of a team of investors not only spreads the financial risk to some degree, it helps you find good buys, increases the labor pool, is a source of outside contacts, and creates an environment of experience and ideas.
While you will find that it takes a lot of time and effort to find the right project and the right group of investors to make that project happen, over time you will begin to know and be known in the community and that effort will be less stressful. Once you’re established and other real estate investors and commercial lenders know your name, you will find that commercial property investment tends to build your wealth much faster than any other type of real estate investment.
Most real estate investors find rental investments, such as leasing office, building, or warehouse space, to be the safest route to take when it comes to commercial property investment. Once you have made any necessary modifications to your building necessary to attract good tenants, and once your tenants are installed, rental investment property can provide long-term steady income. Well maintained rental properties tend to keep their tenants because most businesses prefer to stay in the same location as long as possible. Smart business owners are well aware that customers, clients, and vendors need to be able to find them, and they therefore prefer not to relocate if at all possible.
Commercial real estate investing can be extremely intimidating if you allow it to be. Avoid putting yourself in a situation where you feel out of control or completely uncomfortable. Instead, join a group of experienced real estate investors the first few times you venture into the field and learn from those experiences. Remember, if you have the means, the price is right, the deal appears to be solid, you have confidence in your partners, and you feel you are ready for the challenge, commercial property investment can reward your efforts with the highest profits in the real estate business.