To be successful, real estate investors have to invest at the right time and at the right price. While intuition can play a role in some decisions, it’s smarter to use hard numbers when deciding whether an investment property will be profitable. There’s no shortage of poor investment advice out there. First time house flippers have a lot of factors to overcome to make the best choice.
Real estate investment presents a great opportunity to make a lot of money. However, there’s also the chance for money to be lost on bad investment deals. Losing out on an investment can be a nightmare, especially when you consider all the work that goes into getting a deal together. Here’s some advice for first time house flippers to consider as they’re going into their first deal. Even seasoned investors may find some useful tips.
Make sure you have the correct information on the property.
Sometimes internet records and property listings are outdated. Use them as a starting point, but don’t make your final decision based only on what you find online. It’s better to check the public records, either by physically going to the courthouse or by checking online if the court publishes records on the internet. You should also do the necessary title research to be sure no one else has any claims on the t itle for the property.
You should physically visit the property to see it in person if possible. Many people may recommend that you use Google Maps Street View to get an idea of the condition of the property, but these images can be as many as 12 months old. Much can change in the course of a year.
Review the property to see how it fits your plans.
Obviously, you want to make a profit off the property. As you consider whether to invest in the property, consider whether you’ll actually be able to turn the profit you would like to. You may have to make some repairs or upgrades. You want to be sure that these won’t cut into the profit you want to make.
Keep in mind that upgrades don’t always increase the value dollar for dollar. For example, you could spend upwards of $10,000 on upgrades that only increase the value of the home by a few grand. This would cause you to sell the home at a loss. New investors may have trouble deciding this upfront. Having someone experienced as a mentor can help you until you’re good at figuring it out on your own.
Consider your funding.
In the beginning, you may not be able to pay cash for your investment. If you have to get a mortgage, consider whether the terms are reasonable and fit into your current income. You need to be able to afford the mortgage payments for at least a year. That may mean you live in the investment property while it’s getting ready for flip. You can’t guarantee you’ll be able to flip the property quickly and you need to be prepared just in case.
While you’re hope your first real estate flip will launch you into a successful real estate investment career, you should be prepared for the chance that it doesn’t. Regardless of the outcome, go into the experience as educated as possible, ready to learn valuable lessons that you can apply to your next flip.