Buying and selling property can be a lucrative way to make money...quickly. It can also be the way to lose it.
Millions of viewers each week tune in to watch couples buy houses on the cheap, gut a kitchen or bathroom, slap on some paint and make tens of thousands of dollars on their investment in 30 days or less. They make it look so easy. It’s no wonder so many budding real estate buyers find themselves in over their head the first time out.
It’s simple not as easy as it looks. There are numerous things one should consider before plunking down their life savings on a property. I recently spoke with Sean Conlon, host of CNBC’s “ The Deed: Chicago”. He’s the master at rescuing amateur investors from financial doom. He shared a few key tips you should determine before jumping into the deep end of the real estate swimming pool:
The first thing everyone should know...When is a good/bad time to buy?
SC: Most places have a short-term seasonality cycle that differs from region to region. You usually want to buy when supply is high. For the long-term economic cycles, you need to be more careful and understand that the further you get into a recovery or the later you get into a “discovered” market, the less upside you will be able to capture. Don’t buy until you are financially ready...have a six-month cushion.
What are a few things you should consider before buying?
SC: Do your market research! Understand what type of rehabbed properties are selling in the area you are targeting and at what price. This will help you buy right and understand what profit you can get.
Know the price trends for your area. You can’t flip in an overvalued neighborhood. Also, know the school system if your target buyers are families.
Determine if you can buy the house at a low enough price to invest the required amount and still make a profit.
Remember you are not rehabbing for you, you are rehabbing for the buyer!
What are things you should be aware of before buying (a specific home)?
SC: Do your due diligence on a property (title, liens, recent permits). Get an inspection to baseline how good the “bones” are. Mis-estimating structural issues can destroy a flip. Don’t underestimate your costs to rehab, especially if you are new to flipping. Add 10% to everything and have a six-month reserve in place.
What are things you should be aware of throughout the flipping process?
SC: Make sure to stay on your project every day. Make sure budgets are being held. Also, hold contractors to timelines. A day delay in electrical can cause a three week delay if another sub has to reschedule. And finally, keep your eye on the market and any changes...time kills all deals!