Use these tips to Build A Foundation For Real Estate Investing Success
As a Realtor, investor, and real estate investment coach, I see a lot of houses. (Maybe that's an understatement) . I've done my share of finding properties that need a little TLC, fixing them up, and making a good profit on the sale. If you are willing to do some learning and some SMART legwork, you can get there too!
Here are a few tips to look remember when starting your investing career:
1. A Distressed Property = a Good Investment Property
Here's a hint. The magical situation where someone sells you a pristine house in the best neighborhood in town and then you flip it for a huge profit is like a white whale-- hard to find and borderline impossible to capitalize upon.
However, there are plenty of houses that are "in distress." Foreclosures, short-sales, properties that need to be sold because of death or divorce... these all qualify as distressed properties. Investors know this, and there can be competition for them, because the inhabitants need to sell and need to sell fast.
So keep your eyes out for these types of properties, especially when they are win-win situations (see #4 below). There may be competition, but trust me, there are enough deals to go around for everyone if you keep your ear to the ground.
2. Don't Shy Away From "Problem" Houses
So we've talked about distressed houses. Now let's take a second to talk about "problem" houses. A problem house is a house that has major issues. We're talking structural here, folks. Here's a list of some things that might qualify a "problem house":
- Bad basements. Moldy, water damage, you name it, I've seen it!
- General mold issues
- Roofs that need to be replaced
- Foundation damage
- Busted-up garages, sheds, and other outbuildings
- Interior wrecked by water damage
- General wreckage caused by the inhabitants
I have to admit, I've seen some pretty "gnarly" things when it comes to problem houses. But I also know that with a little (well, sometimes a lot) of work, patience, and some TLC for the home, these type of properties can end up being some of the most profitable, both in terms of financial gains and the general sense of accomplishment that comes with any successful flip.
3. Do The Numbers
When I give seminars and work with my students, this is one of the points that I stress vehemently, because it's so darn important. Let's remember that the goal with real estate is to make money, pure and simple. Sure you may be doing things you love to do-- dealing with people, making connections, planning repairs. There are many fun challenges to investing in properties, and that's one of the reasons I love it.
But back to the point-- you need to understand your costs and stick to those costs if you hope to be in this game for longer than your first flip. The best investors have everything priced out down to the grout in the bathroom, which makes them much more agile when problems arise. Remember what they used to say in those G.I. Joe cartoons? Knowing is half the battle! So know your numbers and get out there with confidence.
4. Make It A Win-Win Situation
There are some investors out there who take the first three points that I've talked about here and execute them flawlessly. But then they forget the last thing-- every real estate deal should be a win-win situation on some level. That means the buyer AND the seller should feel good about the deal.
There are many people who really really need to get out of a distressed property situation because of foreclosures, deaths in the family, or other unwanted circumstances. Be the person that helps them get free of these circumstances-- not the person that takes advantage of them!
Go about your business with the truth, honesty, and integrity that you would have someone extend to you! If you can do that as well as the first three tips I mentioned, you can truly be a success in the real estate investing game.