Working in real estate investing has a lot of upsides: you get to choose your own projects, make your own schedule, and be your own boss. Not to mention the fast turnaround times and huge profits that roll in when you do it right. For a savvy self-starter, the fix and flip industry is a perfect opportunity to make a fortune. However, there is a lot about real estate investing that outsiders don’t understand, and if you go into the business with misconceptions about what’s required to be successful, you run the risk of flopping.
To prevent that from happening, make sure you meet these four criteria. If you do, you are well prepared to get started on your first fix and flip project. If you don’t, follow our advice and you’ll be ready to go in no time.
Do you have a fix and flip team?
No man is an island, and no real estate professional goes in solo. Even if you have the cash to get started on your own, you need people you trust behind you. Some of the most important contacts to start off with are a contractor, mentor, and real estate agent you are comfortable with. If something goes wrong on your project, having quick access to experienced professionals can save you a lot of time, money, and stress.
If you don’t know anyone in the business, don’t worry. Attend real estate networking events in your area to start building your network and find people to work with on your project. More often than not, successful real estate professionals are happy to talk with you about their experiences and recommend stellar crews that can help you pull off a quick and profitable flip.
Have you found a property?
For a lot of new real estate investors, the hardest part of getting started is finding a property to flip. If you already have one in mind, you’re ahead of the game. If you don’t, rest assured that there are a lot of different ways to go about finding one.
Check out property auctions, work with a wholesaler, or hire a real estate agent. Each method has its own pros and cons, so decide which one is right for you and go find your first house. Be realistic about what you can take on, though: a property that is far away from you or that requires a full-gut renovation may be tough to tackle for a new investor. Don’t purchase the first cheap property you come across; do your due diligence to ensure your success.
Do you have capital?
Hard money is great for quick, easy funding for real estate projects, but you can’t get a hard money loan without some cash in the bank.
Most reputable hard money lenders will fund up to 70%-90% of the investment, which means you’re going to need to cover the other 10%-30% right off the bat. Plus, there are fees and interest associated with any loan. The more capital you have in the bank, the easier it will be to deal with the unforeseen issues that arise on every fix and flip project.
If you don’t have enough money, look for a partner. Your profits may be smaller, but you’ll have another set of eyes to reduce the risk and help keep your first flip running smoothly. If your partner has experience, you get the added benefit of a built-in mentor and a source of advice and assistance for your future flips.
Have you done your research?
To know what kinds of upgrades to make, you need to know what buyers want and what pays off. Everything from the local schools to the neighbors’ homes to the area’s demographics will influence the outcome of your flip. Knowing these and other variables will help you decide what’s a good deal and what isn’t, as well as help guide your renovation and budget decisions.
Flipping can be fun, but it’s not a game. If you want to make real money, you need to know what your end goal is before you so much as take out a hammer.
Now that you know if you’re ready for your first flip or not, you should understand what your next step should be. If you need to do some work first, don’t be dissuaded: the more you prepare, the easier your first project will be. If you’ve acquired a team, discovered a property, saved some money, and done your research, then it’s time for you to find funding and get the job done. Anyone can be a successful fix and flip investor with a little effort and preparation. If you meet these criteria, there’s nothing holding you back: go out there and make your fortune in real estate investing.