Flipping real estate is one of the last steady investments left in this recession. You simply can’t trust stocks, small business or 401k’s anymore, but buying and selling homes, well, even when you have to sit through an extended slow season, that property is still, and always will be, worth SOMETHING, even if you have to wait it out for a bit. So here are some of the basics for new investors.
Well, this is pretty obvious, of course. How is it a profit if you buy high? But still, this is a step that many eager young investors forget. Many investors go broke their first year because they think they can take a home that’s already worth a half a million, a home that’s already at the very peak of the market, and make it worth even more. This just doesn’t work. If you fix it up, maybe you can improve the value by, say, five percent. But then, why not make several times that much by taking a cheap, beat up old place and selling it for more than twice what you bought it for?
Another step that should be obvious, but which many people completely ignore! You can’t buy a crummy house and sell a crummy house and expect to make money. Look, if all you want is a fast buck, try the lottery. Flipping homes is all about taking something of very little value and turning it into something of very high value. You know what they say, location is everything, right? Well think of it this way: Location is IMPROVED by the value of the homes within that location. If you buy a crummy house in a mid-level neighborhood and turn it into a real winner, you’re improving the local area value and thus your final sale price.
Control Your Budget
Probably the biggest pitfall for new home investors: They spend so much hiring crews, architects, designers and so on, that by the time they make the sale, there’s little left over to put into the next investment, if they can afford to pay their contractors and stay out of trouble in the first place, that is. Whenever you can, do the work yourself. Look, most of these homes require a few month’s of work and the kind of repair budget you could earn at a minimum wage job in the same amount of time, so why spend ten, twenty times that much hiring a professional crew? Live in the house as you fix it up and it’s all profit, really, since you’re only collecting the final price for repairing your own home!
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