Real Estate Flipping or Real Estate Investing is a real business. It involves buying a real estate property without the intention of residing in it. More than 50% of commercial real estate inventors form part of private equity. A numerable amount of which are individual investors trying to flip a real estate investment. People have always run into the saying that real estate is a very good investment to put your money into.
However, before venturing into this kind of trade, you should know the real risks of flipping real estate. Explore and analyze for yourself whether the risk involved is right for you. Is it really worth your time and hard-earned money?
What is Real Estate Investment?
Investment itself may feel like you are gambling, but it’s actually the opposite. Investing is about taking an educated risk and advancing capital for an expected future profit.
Real Estate Investment is simply using real estate as your capital. You may opt to buy a property within an area where the values of real estate will potentially rise due to consistent neighborhood developments and overall good governance over the area. On the other hand, flipping real estate happens when you choose to invest in a property, restore, renovate and update its design, and sell it for a higher price.
Real Estate Investment 101
Flipping a house or a building has a chance of becoming a great investment. In a short amount of time, you will have a chance to rake in large profits. However, there are real pitfalls in buying real estate for the purpose of flipping it. ;
- Renovation might cost you more than the house or building itself. People lacking in diligence may resort to buying the estate hastily without inspection. People selling houses have various motivations why they are disposing of the property. If they are selling the property hastily, they might not be able to find the time to repair damage brought about by daily use. Some damages might even pass the normal eye test. You might get your hands full if you do not do your due diligence on the house. You might end up spending more on repairs and end up going over the market price of the house. It can end up as a negative asset.
- Not knowing your potential market may transform your asset into a dead one. First-time flippers may run into the problem of overpricing the renovated house without taking their market into account. Disregarding what normal house buyers in the area need and just merely throwing in a price you think is right will not net you any interest. Consulting a real estate professional will greatly help you in this regard. Knowing the average value of the properties in your neighborhood and calculating the potential costs it might take you to repair it will greatly help in your endeavor.
- Bringing in a trusted contractor, who can give you assistance and insights regarding the house, before the sale will give you a great advantage.
Finding the Right Partner-Contractor
Before buying the property, make sure you find the right contractor to partner with to maximize your profits. The most significant characteristics of a great contractor are:
- That he acts urgently to beat his deadlines — Time is of the essence when flipping real estate. You would not want to sell a property that is already past the point when people were still interested.
- That he does not compromise the quality of the project — Contractors are responsible for improving and maintaining the quality of the construction. A contractor that may skimp on using low-quality decking fillers instead of using a high-quality one such as Dex-O-Tex products may not be the right move for someone interested in flipping property. Low-quality repairs may hurt the overall value of the property.
- That he is cost-effective — It is important that an investor keeps his costs low without compromising the quality of the end product. Contractors who are cost-effective with the materials they use are integral in making your investment work. There is no profit to be had if you keep on going over your target cost.
Real Estate Investment is a great business to be in. However, there are multiple pitfalls you must avoid in order to properly move in the right direction. Keeping it straight with your market and hiring the right contractor are the two fundamental moves you must make in order to net a profit in your investment. Treat the house or building as a structure you will end up residing on and you will end up finding your target buyer.