Real estate investing can become a real jungle to navigate. It involves analyzing different types of property, potential risks, strategies, the source of funding, timelines and average returns.
Some of the options presented include the following
The house flipping business keeps on going strong. Reality TV shows have increased its popularity by showing how easy it is to buy, rehab and sell flipped houses (except for a few dramatic effects here and there).
Reality check: flipping houses is not that easy. Finding a good house to flip is a way harder now because of the increasing demand for bargain-priced homes in the market.
Flipping houses is a worthwhile real estate investment as it helps you see profits faster than the rental property. It also takes less capital outlay depending on your deal-making expertise.
However, you have to bear in mind that things move really fast in this market. It takes knowledge, skills, and discipline to get your flips right. So how do you exercise discipline to avoid the many pitfalls that can eat up your profits and result in huge losses?
This past week, I had a chat with Chris Music, who has been flipping houses for decades. He provided three vital strategies you can use to stay disciplined in your real estate investing business.
Are you ready? Okay, here we go.
This is the number one mistake that even seasoned players fall prey. You see the property and get hooked to its unique character and location. Then you start to visualize how it will look so much better after a few (very expensive) tweaks.
You must constantly remind yourself that this is a business. Flipping is all about the profits and getting emotionally attached will only ruin the business side of things.
Treat each potential house that you look at as a business opportunity to achieve both short and long term goals. Create a business plan that highlights your projections to maintain your focus.
Know the market to be able to think on your feet and keep abreast of the latest trends. This could come in handy to get a whiff of a good deal brewing around the neighborhood.
It is also important to pay close attention to the downsides of a transaction. We tend to focus on the great stuff that could happen and forget about the risks. Accurately analyze the risks versus rewards.
When it comes to rental properties, this is not such a big deal because landlords will be able to manage cashflow from rent. In contrast, when flipping houses, you won’t be able to buffer monthly costs with rent. That means you will have to foot the utility bills, mortgage, and other maintenance costs.
This will inevitably dig into your profits if you’re not careful. Get the construction and remodeling done as soon as you can. You could even start selling that house before the final touches are complete.
What do you think real estate investors, especially those who flip houses for profit, need to know about discipline?
Feel free to share your thoughts and experiences in the comments section below.
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