If you take a leisurely scroll through the on-demand video account of your choice, you will probably find several shows that deal with purchasing houses to sell at a profit. Commonly known as “house flipping,” these shows make it seem like a fairly easy process: host buys house, host fixes house in about twenty minutes, and then host proceeds to sell house at a hefty profit–ka-ching and cue the credits. What you invariably don’t see is the paperwork, the back and forth phone calls, the stubbed toes and maybe more importantly, how they are getting their funding. If you are interested in the wide world of house flipping you might want to keep some things in mind.
Plan on Doing a Lot of Research
If you ask any of the top real estate developers they will all say the same thing, you have to know the market. Before you start even thinking about curb appeal or square footage you are going to have do some serious research. A good place to start is, you guessed it, the internet. If you know any friends or family members who are in the real estate business, it would benefit you to talk to them about local housing markets. It also never hurts to crack a book, support your local library and read up on real estate basics. The more you know about the real estate landscape the better the chance you wont be left with a 200,000 dollar mistake on your hands.
Are You a Get Rich Quick Flipper or a Serious Real Estate Investor
There a couple different schools of thought on house flipping. Some people think of it as buying up run-down properties, slapping a couple coats of paint on the walls, planting some flowers and selling it off as quickly as possible. On the other hand there is there is the renovation route in which real improvements are made to same run-down property, renovating the bedrooms, updating the kitchen. The first approach can be seen as a little bit questionable, like passing along a car that has engine problems. With that approach, the profit margin is a lot lower. With the other method, the costs of renovations are higher, but so too is the selling price. Our
Getting Real Estate Development Funding
Unless you are sleeping on top of a large pile of cash, you will probably need to find money to start your real estate venture. Here are just a few real estate development funding options:
- Banks/mortgage loans
- Private investors
- Going in on a partnership
Before you spend too much time thinking about real estate development funding, you should pore over your personal finances. If you plan on taking out loans, would you be able to afford it? Will you have money to cover contingencies? When dealing with houses, there are always contingencies. There’s no point at looking to buy houses if you are still struggling to pay all your bills on time.
Flipping houses is not a get rich quick activity. It requires a lot of time and planning. Despite the TV shows, it rarely is all smooth sailing. Also realize that flipping houses is not the only investment to be made in real estate. For example, there is also commercial real estate. You can have a steady income from renting space. Who knows, maybe being a landlord is your calling.
