Flipping Houses 101 - Hedging Your Bets on Your First Flip
So you think you’ve read enough books, gone to enough seminars, watched enough HGTV, finally got an offer accepted on an investment property and are now waiting for it to close. What should you expect? Smooth sailing or a nightmare? Is there an in-between?
Go over the possible outcomes..Sometimes it’s good to talk to others who have been there/done that. And even though none of it will insulate you from reality, here are a few ways things can go.
Best case scenario is, of course, that it goes swimmingly, making you think you’ve got a handle on this investor/flipper thing. No major issues, be confident that investing in real estate is much less complicated than you originally thought. Do your homework. Take the time to speak to other flippers, studied how to evaluate the value of a property, take notes of what damages or potential expense to look for, and learned how to evaluate the housing market. Get wisdom from others on the importance of how to communicate with sellers. If you do all these things, “Then you stand a much better chance of having a really smooth, profitable first purchase. Of course, a lot needs to be learned on the job, and you’re bound to make mistakes here and there, but this ‘pre-deal education’ will go a long way.”
The key in the beginning, anyway, is to be involved in EVERY aspect of the investment — from knowing the numbers to knowing the area to analyzing the repair costs. Don’t leave any of this in the hands of others. Success depends on your commitment to learning the process and keeping updated with the market.
Many investors buy too high; get their rehab estimates wrong; miss something in the walk-through that’s going to cost them later. “Profit on your first deal is by no means a guarantee. However, your first close can make you money. So let’s say you’ve done your homework and educated yourself on the process, how to price and value things, and you’re ready to go!
Crunch time. Your accepted offer is accompanied in your mind by a certain profit figure when all is said and done. We learned very quickly that it’s good to trust people, but you must VERIFY that their information is true. Keep track of permits and contractor delays, hiring the wrong people and finding more repairs than originally anticipated can be costly. The silver lining in all this?
Don’t consider mishaps a mistake, it was just an expensive learning experience.
Here's some takeaways to remember:
Learn by doing, not just reading about it. Know that ANYTHING can happen.
Profit is never guaranteed (at least not what you may have originally had in mind).
Gather a solid, trustworthy team around you.
Make sure the information the homeowner is giving you is true. Don’t take their word for it, even if they had good intentions.
Have a heart. You are buying what was once someone’s home. Treat them and the deal with care and compassion. Closing a profitable deal was only half the excitement. The other half is coming through for your seller. To them, it may be much more than a transaction.
And of course make sure you are working with a professional knowledgeable lender, who has access to great loan program for fix & flip or fix and keep. I am always available to lend a hand :)
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