Television home improvement shows have been on the rise, and they've also attracted a new audience for the home flipping industry. The new viewer is discovering how lucrative real estate investing can be and are taking steps to get themselves into the game. It sounds nice on the TV shows when you can look around your neighborhood and find a house to flip within the next few months. They show the home being easily renovated and then sold quickly. It seems as easy as 1 2 3.
Now the reality is house flipping takes a lot of work and commitment. Jumping in with both feet after watching an edited television show designed to fit inside of a half hour seems a bit of a stretch. We're going to look at nine successful secrets that are too difficult to cover inside of a half-hour TV show.
1) The Purchase Price: With flipping houses, you make money off of the purchase, not the final sale. Purchasing a house at full pop cannot yield you a favorable result. Even if you find a home $25,000 below market value and it requires that or more in repairs, you're not going to come out ahead. It's all about buying low and selling high, but you need to find the right deal. The overall process takes a lot of time
2) Having Access To Cash Flow: The best case scenario is having access to somebody else's money with favorable rates. The worst case scenario is being in a position where you have to use all your own money. Traditional lenders will likely require 25% down and will probably have some of the better rates. Hard money lenders will be less worried about your credit rating, but they'll charge you quite a bit more in interest. These types of lenders can cost you an additional 10 to 15% in interest alone. They often want their money back quickly as well, making it a short-term mortgage. Knowing these realities up front can help you make an educated decision, so you don't strap your cash flow.
3) Accurate And Detailed Cost Estimates:
Mapping out your cost estimates can be a difficult task and can quickly make or break your project. The truth of the matter is this takes a lot of experience. A beginner just entering into the industry can struggle here and may want to consider working with a mentor to get this step right. The challenge isn't so much listing out the cost and then going shopping at the nearest lumber store. There are margins of error when calculating the math in almost every instance. You have to factor in these costs and expect variances and delays. If you attempt this stuff on your own, you may be handled by it. Until you've been doing estimates for a while, seeking outside help will be worth your weight in gold
4) Access To Reliable Contractors:
Finding contractors that are committed to working with you is a must. If you're just getting into real estate investing yourself, you may be thinking you can do all the work on your own. You may even be proficient when it comes to renovations and construction. However, you're not going to be able to do this job all yourself. The most significant challenge working against you is time. You will want to find a reliable crew of contractors you can work with on a regular basis. Someone new entering into the industry may not realize how big of a challenge this truly is. Contractors are hard to come by because they have multiple projects on the go at once. You may get a crew to work with you for a few days, but you may not see them again for a month.
5) Purchasing In The Right Neighborhood:
The more experienced investor will always buy in the right neighborhood. This topic is something never shown on the TV shows. If they do cover this, they just touch on it making it look a lot easier than it is. This can be a costly mistake if you get this step wrong. Not every house with the deep discount is worth purchasing because the location must be spot on the mark.
6) Utilizing Your Hands On Abilities:
There are instances where are you may want to roll up the sleeves and do some work yourself. You will want to prioritize what this could be and measure your opportunity cost. If you can get the job done quickly and efficiently, it may be worth your time. You should utilize this way of thinking if you're great a task and it's challenging to delegate out.
7) Do Not Overdo It:
Attempting to make the house the nicest on the block has its drawbacks. Unless you find some terrific bargains with materials, you certainly do not want to price yourself out of the market. Improving the perceived value of the house is one thing, but It has to remain in your budget. It's simple to blow your budget because the stores provide the better materials for just a few dollars more. If you do not draw a line, you will not be able to sell the house and make money.
8) Adding The Perfect Details:
Sometimes having just the perfect touch with the finishings' can go a long way. You will want to make a conscious effort to list out finishing items you can buy at low cost. It is an opportunity to increase perceived value for the home allowing you to make significant returns when you sell. For example, this could be selecting light fixtures that fit the room or better light switch covers.
9)Not Holding Inventory For Long:
You're in the game of flipping homes not holding on to them. It's not hard to get attached to a project and have it run on well past deadlines. Experienced Real Estate Investors keep a healthy distance and don't get emotionally attached to projects. It's easy to mess up if they're attached, and they've invested so much of their time and effort.
These are the nine things most beginners lose sight of because the television shows can't spend adequate time on the topics. People need to know the truth because things can be made to look very easy when in fact they're not.