Posted on Wednesday, June 13, 2018
Being a house flipper is very similar to running your own business. It takes a full-time commitment to be successful. Without the knowledge of the business and a grasp of the process you could end up working harder and end up with smaller piece of the profits. Before you dive into the real estate flipping business here are five important factors you need to consider.
1. Time Commitment: Flipping houses is a large time commitment. If you have a full-time job it does not mean you need to quit but you should be ready to take on a heavy workload. There are so many small steps before you can even move on to the bigger ones like; securing the finances, to closing the deal, to pulling permits and that can be hectic and a time-consuming experience. Once you’ve finished your property typically will not sell as quickly as you anticipate. There is usually a period of lag time between listing and the actual sale. From start to finish the project takes time and the amount of work can be quite consuming as well. You need to be willing to balance the project with whatever else you have going on.
2. Team Building: A good team around you can make or break your long and short-term success. A good real estate agent can help you find and close more deals. A good attorney will help protect your best interests without wasting time going back and forth. A good contractor will help run your rehab keeping an eye on the budget and juggling several different personalities. A reliable property manager will run your rental property so you don’t have to worry about any potential tenant issues. By spending more time finding the right people each rehab will be as stress free and easy as it can be.
3. Marketing Matters: As much as you may feel you are ready to get started you need deals to work on. Rehab and flip deals are not the same as other deals you may see in your market. To maximize your bottom line, you need deals you can obtain at a deep discount. It doesn’t matter which marketing option you employ if you do something. Whether you plan on working with local wholesalers or starting a mass direct marketing campaign, you need to do something to generate ideas. The amount and style of marketing you do is a good indicator on the type of deals you will work on.
4. Balance Your Portfolio: As you get started flipping houses you need to consider your goals. Every flipper wants to net as much as possible on every deal. The question is what are you going to do with your profits? Are you using them to supplement your full-time income? Are you going to build your real estate business and look to purchase other properties? If you do purchase property are you looking for more flips or long-term results? It doesn’t do you any good closing a deal if you are going to recklessly spend your profits. The best flippers have a balanced portfolio. For every three or four flips they do they reinvest a portion of the profits into a new rental property. Even if you aren’t comfortable with being a landlord and collecting rent you need to balance out your portfolio. You can easily hire a property manager to take care of the property. The cash flow you receive can offset any lulls you have in your rehabbing business. A balanced portfolio allows you to look at different markets and explore new opportunities when they arise. Going from flip to flip without a portfolio plan is a recipe for disaster.
5. Always Look for The Next Deal: Getting a new deal is great! It’s basically the #1 goal in the real estate business. However, it is important not to put all your eggs in one basket. The reality is that regardless of the struggles you have with the property before you know it you will be done with your current project. Without new deals to work on you will be right back at square one. With any marketing you do you need to keep one eye on the current deal and one eye on the next one. Take some time every week to reach out to new deals and build your pipeline. Here is where you need to have a reliable team in one place you can lean on so you can run the business and find your next deal.