Getting started in real estate can be an overwhelming experience. Between all of the different opinions and advice it is easy to get pulled in a dozen different directions. If you are not careful you can end up in a deal that you regret. Like any other new career you need to have a vision in mind. What makes real estate so great is that your vision can be unique to your personality and your market. This is especially the case when it comes to flipping houses. With great potential for profit there is also a good amount of risk. One or two small mistakes can leave you wondering what went wrong. Here are six tips for any first time real estate flipper.
1. Map Out A Plan. Before you even look at a property you should have a good idea of what it is you want out of the business. Are you looking to flip one property a year or one a month? How much capital do you have at your disposal? How much time are you willing to spend finding new deals? There are dozens of questions you should answer before you make your first offer. You don’t need to know every step you are going to take for the next twelve months but you should have a plan in place to help guide you. The more defined your plan is the easier it will be to find properties, close deals and maximize profits.
2. Know The Property And Market. Buying an investing property is not a decision that should be taken lightly. You need to spend the time and do your homework. The biggest reason that some properties aren’t as profitable as others is because of the lack of due diligence. In most cases if you put the work in learning about the property and the market there will be no surprises. There is no excuse not knowing about the local foreclosure rates or amount of current inventory. There is no reason why you can’t catch an electrical problem in the basement or a potential issue in the attic. Before you make an offer you need to know everything about the property and the market it is located in.
3. Network. When you are just starting out new deals will be few and far between. In order to get past this you need to network. Networking is something anybody can do with a little time and effort. Most every area has local networking groups or investment clubs. For a few hours in the morning or after hours during the week it is worth your time. All it takes is one or two new contacts to completely change your business. The real estate business can be described as a numbers game. The more contacts you have the better your chances are at finding deals. Even if networking isn’t necessarily your thing you cannot minimize the importance of it.
4. Appreciation. In the simplest form as a real estate flipper you are looking to buy low and sell high. There are two ways this can happen. The first is to buy in the right market and hope the value takes off. The second is to add value through improvements. A mistake that many first time flippers make is thinking that all improvements add value. You need to do the right work for the property and the market it is located in. This means spending time looking at properties that have recently sold. It is important to keep personal preferences and emotions out of your improvements. What you like is not important. You are looking to add value and create demand. Accept all the input that you are presented with and always focus on ways to increase value.
5. Exit Strategies. In a perfect world you will sell the property at your price in just a few weeks. This scenario is the exception rather than the rule. In most cases you will need to adapt with whatever comes your way. You need to be prepared to make decisions if everything doesn’t go exactly how you planned. What will you do if there are no offers at your list price? Will you lower your price or explore a rental option? Is renting even a possibility for your market? Before you do anything you should have multiple exit strategies in place. Hopefully you will never have to use them but you should consider them just in case.
6. Put A Team In Place. As you are building towards your first purchase you can’t forget about the people around you. Flipping a property takes a solid team. This starts with your real estate agent and mortgage broker. From there you need your attorney to make the deal happen. After you take ownership you will lean heavily on your contractor and subcontractors. When you sell the property your accountant will advise you on how to best allocate your profits. If your team is weak even in one of these areas your deals will not be as profitable as you would like. Spend the time to make sure everyone on your team is a good fit for you and your business. A good team can make or break just how successful you are.
Flipping real estate gives you the opportunity for limitless wealth and the ability to live on your own terms. As great as the business is there are several areas you need to be proficient at to be successful. Follow these six tips to help guide you as you search for your first deal.