Real Estate Investing 101
Real Estate Investing 101 is a series of articles aimed at new real estate investors wanting to learn the basics. There are so many ways in which you can invest in real estate. You can take your pick based on your interests and experience, how active or passive you want your investments to be, and how much risk you are willing to take on.
Real Estate Investing 101: Fix-and-Flip Investing
What is it? In a nutshell, fix-and-flip investing involves purchasing a property in need of renovation or repair, fixing it up, and then selling it for more than you paid for it You will be on the hunt for the houses nobody else wants to buy, including houses that are falling apart, that are outdated and ugly, and houses that, for the average buyer, would require too much time and money to make them livable. Once you find a property that fits the bill, you need to pay the lowest possible price for it, considering all the work you’ll have to do, and the money you’ll need to spend, to make it a desirable property for someone else. Finally, you need to sell the property for the highest possible price in the given real estate market. The difference between the purchase price and the selling price is your profit. It is important to accurately budget for the renovation costs and the holding costs of the property (mortgage payments, property taxes, utilities, etc.) to accurately measure your profit. To find properties to buy, you can check out local property auctions or drive around neighborhoods to find houses that look run down and research who the owners are.
What do you need to know?
Technical knowledge and skills. Whether you have the technical skills to get stuck in and do the work yourself or plan to hire a general contractor, you need some basic knowledge and experience in construction and home renovation. This knowledge will help you decide which repairs and renovations need to be done, and how much work and money these different tasks will involve.
Understand the real estate market. Each real estate market is different, and for each property and neighborhood, you need to understand what buyers are looking for and what they are willing to pay for a property in that neighborhood. This will help you determine if there is sufficient margin between the purchase price and the potential selling price for you to make a profit after paying for renovations.
Is fix-and-flip investing right for you?
In fix-and-flip investing, you need to be able to roll with the punches. There is a saying that life is what happens when you’re making other plans. Even an experienced fix-and-flip investor may need to deal with things going wrong, such as uncovering problems in the property and needing to make unexpected repairs that were not in the budget. Then there are rogue contractors, tricky local building regulations, or even sudden changes in the local real estate market. If you like solving problems and you’re able to adapt to the unexpected, then fix-and-flip investing might be perfect for you.
We hope you found this article interesting and informative. Please keep reading our other articles in the Real Estate Investing 101 series to learn about more ways in which you can invest in real estate.
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