Fix and Flip: 3 rookie mistakes for real estate investing
I hear the radio blare: “Call now to learn how to make millions in real estate by following 3 simple steps” Let’s be honest, if it were that easy to make millions, why would someone be willing to share their “secrets” for just the cost of a class. Unfortunately investing in real estate is not easy and many new investors will lose substantial money. Below are the 3 quickest ways to lose money in fix and flip investing.
- Overpay: Throughout the vast majority of the country houses are appreciating. This appreciation is a double edged sword, it is great when you sell, but challenging when you are trying to acquire a property. When evaluating a property, make sure you have the margin needed in order to actually make money. Due diligence prior to purchasing a house is critical along with intimate knowledge of the neighborhood. When evaluating a property is information on Zillow/Trulia/etc.. correct?
- Underestimate expenses: Estimating expenses for an investment property is always difficult. Many times buyers get the deals they do is because they accept the property as is, where is. Unfortunately experience and a good eye is the only way to get better. There are tons of gotchas that can occur on a property (foundation, roof, etc…) that can quickly change a profitable transaction to severely unprofitable in a hurry
- Hold time: When margins are tight, the time it takes to get into and out of a deal will impact the profitability. The trick is to find the sweet spot so that the rehab is done right, corners are not cut, but the job is done very efficient
Real Estate articles that are helpful to anyone getting into the real estate investment game:
- Is Zillow correct on their valuation?
- Is the flip dead in Denver and other cities?
- 4 tips to increase sales price; what is your wow!
- Hard Money Basics; get the facts on private lending
Learn more about hard money lending: fairview.atlprotodev.com
Learn more about Colorado Hard money: www.coloradohardmoney.com
Written by: Glen Weinberg COO Fairview Commercial Lending