Wouldn’t it be blissful to buy a property, use your handy skills to fix it up, refurbish it, make it enticing, and then flip that house for a large profit? Yes, it would be blissful, but it wouldn’t be realistic. Investing in real estate properties can be a tricky business with a pipeline of multiple risky investments working simultaneously, not just one house at a time. It takes more than one or two people with maintenance or design skills to pull off successful real estate investments. Before you dip your tenderfoot toes into the real estate investment pool, there are some things you should carefully consider.
Don’t go it alone. To be profitable in your real estate investments, you need an entire team on your side. You’ll need a real estate agent, a home inspector, an appraiser, a closing attorney, and lender to assist with your own property investments as well as helping potential buyers. You may also need contractors for home repairs. If your plan is to hold properties for rent, you may also need a property management company. Working with a management company or property manager is another complex layer to property investments, and could prove costly. Research various property managers to determine if they may help or hurt your bottom line.
You cannot dip into your family’s retirement savings, buy a property you think is priced low, and then do it yourself in a flip. Many successful investors warn against single transactions. If you’re buying one home at a time to fix up and sell, you’re doing a transaction, not operating a business. Have you ever frequented a restaurant that has only one item on the menu? Doctors have more than one patient. A mechanic repairs multiple cars. Working one house at a time makes for a risky hobby, not a business structure.
It’s unrealistic for you to think you’ll get rich quick by making real estate investments. Many people are intrigued with the television programing showing successful couples buying, fixing, and flipping houses. It is tempting to think that if the people on television can make a living flipping houses, then so could you. But what you don’t see is the behind the scenes garnering of education, experience, and wisdom to navigate the industry with minimal risk. You shouldn’t believe everything you see on television. You need a solid business plan before you make your first purchase. Additionally, you need the understanding that real estate transactions aren’t about the properties, but about the numbers. To be profitable in investing, you should have multiple properties in various stages of purchase, repairs, rentals, and sales. You cannot stumble into success by planning as you go, or fly by the seat of your pants one project at a time and expect to be successful.
Any property you purchase is going to come with risk. Although the price might seem perfect for the plucking, there may be ugly truths behind the home’s exterior. If you’ve blown your entire savings in the purchase of the property, you won’t have any funds left for the fix it projects or expensive repairs necessary before the house can be put on the market. It’s not as easy as buying a house, holding on to it until the value increases, and then selling it quick for a big buck. Many investors find themselves floating in failure, up to their eyeballs in expensive projects because they paid too much for a property and didn’t have a proper plan in place for repairing and selling the house.
Before you make your first step into the realm of real estate property investments, do your research. As with any business undertaking, you must understand the market and its demands. Educate yourself about real estate investing. Read articles, buy books, and investigate the Real Estate Investors Association. Buying your first property without proper knowledge of the industry is jumping into the pool without any water. You can prevent setting yourself up for failure with a bit of patience, prudence, and proper respect for the industry into which you’re trying to succeed.
For more information on investing in real estate in DeSoto County, give Mark a call at 901-239-6041.