The reasons to invest in commercial real estate and residential properties are plentiful, but one of the main reasons is ROI. In other words, both residential and commercial real estate investing can be highly profitable. Although around 32% of people looking to buy a house are first-time home buyers, nearly 6.6% of all single family homes and condos purchased in the first quarter of 2016 were flipped properties — so it’s safe to say that flipping is becoming more and more popular.
But if you’re looking to get in on residential or commercial property investing, there are certain mistakes you’ll want to avoid making. Although these are all quite common, they can lead to unprofitable flips and difficult lessons learned. Your best bet is to learn from these mistakes others have made before you ever have to make them yourself. Here are our top four property flipping mistakes to avoid:
- You invest more than you should
One of the most important residential and commercial real estate investing basics is that you need to go in with a budget and stick to it. Many flippers are too tempted by the potential of their property. You should never sink too much of your own finances into a flip. This can spell disaster, especially when you may have unexpected projects and upgrades to account for. You should look into your real estate secured lending options. Hard money loans for real estate investors can help you to purchase a property quickly in a way that offers better protection for your financial decision.
- You don’t give yourself enough time
Flipping any type of property is extraordinarily time-consuming and labor-intensive. Do not underestimate the time you’ll need to execute a flip. Even negotiating the deal and securing hard money rehab loans take time. Then, you’ll need to actually fit up the property, schedule inspections, and make sure everything is up to code. After all that is done, you’ll need time to put the property on the market and sell it. These meetings and negotiations also take up a lot of time. If you’re not willing to put in the effort, real estate investing and flipping might not be the right venture for you.
- You don’t have the skills or knowledge
There’s something to be said for not being afraid to get your feet wet — but you also can’t go into a new venture totally blind. If you don’t personally have the skills and knowledge to be successful, you need to hire a team of professionals who do. It’s better to hire professionals to do all the work anyway; tempting as it may be, unless you’re highly skilled, this is not the time for a DIY project. But even knowing how to pick the right property, assessing the importance of upgrades, and being familiar with the overall market takes a lot of study. If your general know-how is lacking, make sure you enlist help from people you trust prior to making any big purchases.
- You don’t have a back-up plan
Of course, we all want to believe that our investments will be successful and that we’ll make a big profit. The reality is that this doesn’t always happen. Even if we are totally prepared, find a great buy, and do all of the necessary fixes, you may still have a tougher time selling a property than you might have anticipated. It’s important to hope for the best but plan for the worst. By that, we mean that it’s important to have a back-up plan for your property. Are you able to rent out the property while trying to find a buyer? Could you work with another investor? Even if you’ve used real estate secured lending, your investment isn’t totally protected. If your property doesn’t flip as fast as you wanted, you need to have a viable exit strategy. Preparation is key.
If you’re interested in finding out more about how real estate secured lending can help you purchase and flip properties, contact us today. We’ll answer any questions you may have about real estate secured lending and how these hard money loans can allow you to start pursuing property investment.