Landing your first real estate investment deal can be a dream come true….but at the same time, it can turn into a disaster if you are not careful. Following the right formula while avoiding common pitfalls can help you make the most out of your profitable venture.
A decade has passed since the dramatic real estate crash of 2008 and the housing market is experiencing a promising rebound. Here in Florida, home to some of the hottest real estate markets in the country, home prices are on the rise and investor demand is growing in many cities.
When it comes to the hands-on type of real estate investing, house flipping is the best way to put your real estate knowledge to use as an investor. There are 2 ways to flip houses:
1) Purchase a home in a hot real estate market where growth is promising and prices are rapidly rising, hold it for a period of time then resell at a higher price; or
2) Purchase a fixer-upper in a hot neighborhood, repair, update and/or improve the property, then resell it a price that reflects the newly upgraded condition.
For the purpose of this article, we will be focusing mainly on the “fixer-upper” model.
Finding good deals is key to flipping real estate and extreme care and caution should be exercised when deciding whether or not to take on a project. The key is to buy low and sell high. Following the proper procedures can help turn your fixer-upper projects into a scalable business in a reasonable time period.
- Research! Research! Research! Do your due diligence to make sure that the numbers add up.
- Do a self-analysis and gauge your abilities to predict the possible repair costs.
- Hire legitimate, trusted professionals to do the work on major repairs. Asking for referrals from peers can be beneficial when deciding who to hire.
- Make sure that you have a signed agreement between you and your contractor so that you can properly manage time frames.
- Conduct thorough research on the area and specific neighborhood where the property is located.
- Consider flipping a foreclosed property.
- Conduct thorough research on required permits and figure them into the project timeline.
- Hire a trusted property inspector and have a thorough inspection done prior to starting any rehab work.
- Keep a close eye on the project! It is ultimately your responsibility to stay in the know and ensure that things move along smoothly and efficiently.
Minimizing risks will help keep your flip from turning into a flop.
- Don’t rush and buy the first house you see. Take your time and wait for the right property to come along.
- Don’t fall in love with the house! Treat every project like a business and make decisions based on logic, not emotions.
- Don’t go on a wild goose chase by making blind assumptions about the property’s worth. Do your research!
- Don’t take on a project if you are not certain you can afford the renovations.
- Don’t rush, and don’t take unnecessary shortcuts just to get the project over with quickly.
- Don’t ask for a price you know is impossible just to test the waters.
- Don’t underestimate the magnitude of the project.
- Don't forget to work on the curb appeal.
- Don’t skimp on fixtures and appliances. Install quality appliances and avoid cheaper options.
Having the right team of professionals in your corner is of key importance, as this can make or break your projects and ultimately your business. JBM Realty, LLC operates within a group of partners that offer consulting on legal, accounting, investments, and traditional and non-traditional mortgage resources. We provide one-stop solutions for our clients’ real estate needs. We are transforming the way investors make real estate related decisions and connect with local professionals. Our boutique firm and our hand selected members offer our clients results tailored to their specific needs. Give us a call for your investment or any real estate related needs.