Flipping houses is a fantastic way to earn extra income. Many house flippers turn these profits into a full-time investment-based career and enjoy every minute of the fast-paced DIY lifestyle. If you are considering becoming a house flipper, there are a great many opportunities awaiting you in the near future. Flipping homes provides rock-solid payouts that can really transform your personal finances and savings portfolio in a hurry.
However, there are some significant pitfalls that must be avoided when you begin flipping houses for the first time. Beginners face a steep learning curve that can offer a number of painful lessons if you aren’t careful. Utilizing this list of five essential mistakes to avoid can help you make the most of your first real estate investment and set you up for incredible profits on each and every deal you make long into the future.
1. Know how to augment your portfolio with additional assets in the real estate space.
While the REITs vs real estate debate continues to rage on, there’s no denying that investing in traditional, physical property provides you with the potential to earn substantially more on your investments than many other opportunities (including REITs, or real estate investment trusts). However, REITs offer a unique benefit as a hedge against potential losses, especially early on in your journey into this new type of real estate investing. Holding on to some of your REIT assets is a great idea.
2. Don’t buy a home with just your own cash.
Many who are thinking about real estate investing think that they have to wait until they can buy a home outright in order to get into the marketplace. This couldn’t be further from the truth. In fact, there are a huge number of outlets that are more friendly to real estate investors than they are to buyers who are looking to purchase a home in order to move into the property! Private money lenders love working with real estate investors because they often move quickly from deal to deal, providing the financial institution with a great return on their investment as well.
Leveraging someone else’s money is a unique feature of the real estate market that you should take full advantage of. Waiting until you have the cash together to buy a home outright is only going to see you sitting on the sidelines while opportunities pass you by.
3. Don’t invest in a home with foundation trouble (unless it’s an absolute steal).
While there may be few hard-and-fast rules in the world of real estate investing, one that many buyers live by is the health of a home’s foundation. If the property you are considering has foundation trouble, the repair work to fix this one element alone may be more trouble than it’s worth. The name of the game here is quick turnaround time. A foundation issue can take weeks or months to sift through, all while the property sits idle and drains your resources.
4. Keep an eye out for multi-problem issues.
Likewise, a problem in the foundation or other key areas is likely to introduce other issues as well. The need for plumbing repair in Albuquerque, for instance, is often paired with foundation damage. On their own, plumbing upgrades and repair works are simple and can be incredibly effective for helping you to find bargain pricing on the initial sale and the opportunity to hike the price upon relisting the asset. While plumbing issues can contribute to a dramatic depreciation in a home’s value, solid waterworks can enhance a home’s utility and value by a huge margin.
5. Know your lane when you get into flipping.
House flippers are not landlords. When you purchase a home that is intended to be used to earn flipping profits, you are not seeking out a tenant of any kind. Understanding the type of real estate investor that you are is a crucial component of finding success in commercial real estate, residential real estate investing, and every other facet of the endeavor.
With these five areas in mind, it’s time to get started in real estate!