One of the most common mistakes first-time fix-and-flip real estate investors make involves paying way too much for their first project homes. Though $45,000 for a two-story home on the quiet side of town may seem too good to pass up, it might be too good to be true at the same time. Here are a few ways to determine whether you’re getting the deal of a lifetime – or perhaps the headache of a lifetime.
Don’t Ignore Your Intuition
If you’re looking at a home and the price seems far too good to be true, listen to what your intuition is telling you, especially if you’re a first-time investor. It can take years of practice and learning to fully understand what makes a property a profitable one, and there are plenty of people out there who won’t think twice about duping an excited investor into buying a money pit in a cold, hard second. If you think something about the situation isn’t right, don’t just ignore it.
The Foundation and Home Structure
One of the most important parts of a home is its foundation and structure. These two things literally keep the walls standing, and without them, there’s no amount of fixer-upping you can do to provide a buyer a safe haven to call home. One of the first things you should do is inspect the foundation and the home’s structure – the walls, the roof, and other vital parts – to ensure they’re sound. Though replacing the roof may not be a dealbreaker, replacing a foundation almost always is.
The Existence of Potential Buyers
There’s more to turning a profit with a fix-and-flip than simply finding a good property at a good price and renovating it on budget. If there’s no one there to buy the home, then it doesn’t matter how good the deal was – you’re losing that money in the end. You’ll need to consider far more than the home itself and actually learn all you can about the local market. Look into state, city, and even neighborhood trends to discover how many homes are selling, how long they’re on the market, and what the typical selling price for similar homes has been in the past. Without this info, you won’t know if you’re getting a good deal.
Can You Handle the Renovations?
Finally, before you sign a purchase contract for a property, make sure you have the funds and the knowledge to renovate it. All too often, newer investors underestimate just how much it will cost to renovate a property, and even more fail to consider the possibility of something going wrong. Remember that no project ever goes 100% to plan and be sure that you talk to contractors before you buy, too.
Fix-and-flip real estate investing is still incredibly popular but making the wrong purchase – especially in the beginning – can devastate your investing career. Follow the advice here to discover whether you’ll be able to turn a significant profit instead of taking a loss so that you can meet your real estate investing goals.
