There are many moving parts to make a successful purchase, fix, flip, and eliminate as much risk as possible. It is highly recommended to find a market and region that supports all of the tips below.
1. Perform due diligence and connect with local investors.
As the saying goes, information is power. So choose one or two zip codes for a particular region you are considering purchasing, modifying, and reversing. Once that’s done, I want you to immerse yourself in everything related to real estate contained in those zip codes. This means a network of realtors, wholesalers, and others buying, repairing, and flipping in the area.
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A network of real estate investors who may be using other strategies. Check out Craigslist, Zillow, Trulia, and all other online platforms. I want you to know the properties sold at the auction. Know which properties are suffering, have been refurbished, and are in average condition. I want you to know how long the property has been on the market. You simply immerse yourself in the numbers and know all the right people. Your network is equal to your net worth.
2. Start small.
The second thing I want you to do is start small. I don’t want you to be overwhelmed by the big work. For example, don’t buy real estate that requires full-scale construction rehabilitation, including all sorts of crazy things like permits and foundations. That is the last thing you want to do. Try to find a property that you can buy in a way that is well below the market price. They say you make money when you buy, not when you sell. So you need to buy dirt cheaply and buy properties that only need cosmetic rehab. That is, paint the inside, paint the outside, replace the kitchen counter, paint the kitchen cabinet, put in new fittings, add new laminated floors, install new tiles or carpets, replace lighting fittings, landscaping to hold. These are basic items and don’t cost much if you’re considering buying, modifying, and reversing. You can go in and out immediately.
Keep in mind that the less time you spend on a particular rehab, the lower the risk. You really want to get in and out as soon as possible. Also, the less money you can invest in that particular property, the lower the risk. So I want you to start small. Start with a small amount for refurbishment and a small amount for the amount you are considering investing.
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3. Develop multiple exit strategies.
Finally, I want you to have multiple exit strategies. When buying this property, make sure you have the potential to sell it to your homeowner. In short, the region needs infrastructure to support the demands of homeowners. Of course, margins need to make sense to make a profit, but you also need to ensure that someone lives in the area for school districts, shops, equipment, and so on. You need to keep that end buyer in mind. Also, if you’re considering selling to a homeowner, it’s a good idea not to set a price that’s too high, as you don’t want to be on the market longer than necessary. I always rehabilitate all A-class flips to better standards than equivalent sales and like to list them at the same price or a little cheaper as time is money. The sooner you withdraw money from one transaction and move on to the next, the more transactions you can make in that calendar year.
- The first exit strategy is to sell it to the homeowner.
- It’s great if the area supports potential “buy, repair, tenant, sale to investors”. So you can buy a property, renovate it to the right standards (not Class A standards), acquire tenants, secure a good property management company, and then sell it to investors. As long as those numbers make sense and investors can make a good cap rate, I think it’s another great exit strategy for your investment.
- If for some reason you can secure this property at a cheap price and you don’t want to do all the work yourself, we recommend wholesale. Make sure to close the transaction first, fulfill the contract, put the margin on top and wholesale to someone else. If you spend time educating yourself about who buys, repairs, and flips in the area, you’re confident that you can buy, fix, and sell it to flippers all day long. increase.
- The final exit strategy I propose is to do a minimal amount of work on the property, make it a clean canvas and wholesale it to someone else. You find another purchase, repair, flippers, leave enough meat in the bones where they can enter, buy real estate, make higher end refurbishments than you did, and still their margins You’ll want to make-there’s a little more margin than if you were traditionally doing wholesale trading while you might make.
Perform due diligence as much as possible and network with anyone in the area. See what some of the top dogs are doing and how they turn the house over. The more you immerse yourself in the industry, the broader your thinking and the deeper your knowledge.
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