Real Estate Investing Basics: Finding a Property to Flip
Although television shows like Flip or Flop and Flip This House leave many viewers with the feeling that making money by flipping homes must be too good to be true, this isn’t necessarily the case. Don’t get me wrong — flipping real estate isn’t a golden ticket to instant riches, and there are far fewer opportunities out there now than there were just a few years ago during the Great Recession. But that doesn’t mean there aren’t still plenty of great deals waiting out there to be discovered by eager investors.
But as a new investor, how exactly are you supposed to locate these flipping opportunities? In this article, we’ll talk about how to search for real estate deals that you can buy, renovate, and sell for a profit.
Get to Know Your Target Area
Real estate is extremely location-specific — market conditions in one neighborhood can differ significantly from another neighborhood just minutes away. This makes it extremely important that you take the time upfront to really get to know the area that you want to invest in.
Most investors begin right in their own backyard. They purchase properties in communities that they’re already familiar with, often very close to where they live. This can be a good idea for investors just starting out. But, please keep in mind that a general familiarity with an area is no substitute for comprehensive research and thorough due diligence.
By really diving into current conditions and trends, you may discover other nearby markets that offer more security and greater growth potential.
There is profit to be made from flipping homes, but it’s important that you don’t judge an investment opportunity on net gains. Why? Because in most cases, the larger the net gain, the larger the initial investment.
Everyone wants to jump on the deals with the biggest upside, but as a new investor you’re probably better off dipping your feet in the water and starting slowly.
For your first few flips, look for ways to add value through minor fixes and upgrades like painting, flooring, and landscaping. You’ll be amazed how little it costs to make a big impression on future buyers.
As for major overhauls, leave those to the pros, or at least hold off until you have a bit more experience under your belt.
Always Be Skeptical
It’s easy to get excited by what looks like a good opportunity But don’t let emotions overcome rational decision making. Everything isn’t always as it initially seems when you’re looking at properties. And the saying, “you can’t tell a book by its cover,” applies to every piece of real estate. What looks good outside may look awful inside and vice versa.
So always be careful and perform full due diligence. Even the most experienced investors can get themselves into more than they had planned on from time to time. But without due diligence, the chances of big problems are close to 100%.
That’s why, before you commit money to a specific property, you want to hire a professional inspector to create a detailed analysis of the home’s condition. Then seek out quotes from multiple contractors for the work required. Or, if you plan on doing the majority of the work yourself, be sure to leave plenty of room for error when estimating your time and material costs. (Remember that old cliche: measure twice, cut once.)
As you get more involved with flipping homes and real estate investing as a whole, you’ll quickly discover that patience is vital. Sure, you may miss out on potential opportunities because you were cautious. But that’s a far better strategy than letting your enthusiasm lock you into a property that creates far more work and far less profit than you anticipated.
Know Your Limitations
Unless you have decades of experience in home construction and improvements or an endless supply of capital to invest, make sure that you understand your limitations from the very beginning. Flips come in all shapes and sizes, and while no two opportunities will be the same, you’ll often see the greatest upside from the most challenging and demanding properties.
Would you feel comfortable doing major plumbing, electrical, or structural work? Do you have the capital to invest and the time available to oversee such a big project? These are the types of questions that you need to ask yourself when considering different, more demanding investment options.
No matter whether you’re talking about your finances or personal capabilities, know your limitations and don’t set yourself up for certain failure by getting in over your head.
Get Professional Assistance
The biggest assets that any new real estate investor has are the wealth of knowledge and the access to listings that are available to them — free of charge –when they work with an experienced local Realtor.
When you have a professional real estate agent on your side, you have a partner who’s there to send you real-time listings as soon as they come on the market. This allows you to get a head start on the competition who are relying on public websites and platforms which can sometimes take days to update.
And perhaps even more valuable — especially to investors just getting started flipping — is the advice and suggestions from a seasoned expert who has an in-depth understanding of the local real estate market.
Flipping real estate can be an effective way to generate income and build long-term wealth. But there’s no shortcut. It takes time, effort and lots of research to find profitable, worthwhile opportunities.
If you’re thinking about buying real estate in South Florida, call and let me help you.
New Harbor Realty