Real estate flipping offers many benefits to investors, but it is easy for those new to the process to become overwhelmed. From feeling like you need to be rich – or at least have the purchase price of a distressed home saved up – before you start to trying to do it all yourself, these are the most common myths and misconceptions new investors make.
Are you Falling for These Real Estate Investor Myths?
You Need to Have a Lot of Seed Money
While you will need some money to get started, the amount is surprisingly small. Once you find a property that you like, you’ll be able to secure financing from a variety of sources, including conventional and private lenders. Most people remember how much trouble they had securing their mortgage for their primary residence; private lenders who are investing in a flip property often require far less information and the process is streamlined.
When you secure financing for a flip property, the investors you use are more concerned about the profitability and potential of the property itself and less concerned about digging through a decade’s worth of your bank statements. While you will need to provide information about the deal and about your financial health, the process is much faster and far simpler than securing a home mortgage.
The money you’ll need will be for putting the property under contract and for closing costs; you may well be able to finance the rest, so you don’t have to delay your dream of flipping homes until you save the full purchase price. Your first project is usually the biggest hurdle – once you have a history of successfully flipping properties, financing will become even easier to secure.
DIY Adds up to Big Savings
If you are already a contractor or have a specific skill set, then doing some of the work needed to flip a home yourself can help you save. If you are only available on the weekends, are unsure of your skills or only have a limited time, then going the DIY route may not work as well.
The faster you get a property ready to sell, the better in most cases, so carefully consider both the timing and the true cost of doing things yourself before you decide to DIY. If you want to be involved, then taking on the role of project manager may be better – you can still oversee the work, but you can let a pro get into the home and do what they do best.
Wholesaling is the Right Place to Start
Wholesaling, or working to find potential investment properties for others, can be a way to get started or to earn extra capital, but it is not the only way to get started. Wholesaling is low risk, allows you to get to know the investors and hard money lenders in your area, but there are some significant drawbacks.
Depending on where you live, wholesaling may be considered brokering – and you won’t be able to do it legally unless you are a real estate professional. You’ll also be missing out on some amazing potential deals if you are simply playing the middle-man.
Jumping in with both feet does have a learning curve, but there is no better way to learn the ins and outs of flipping a home than by doing it. There is nothing wrong with wholesaling (provided it is legal in your area) but it does not really develop your skills or lead to a long term investment – you find properties, connect buyer and seller and move on.
To learn more about getting started in real estate investing or flipping, contact us or follow our blog for the latest news, tips and hints from the pros. Call today to find out how CALCAP can help you!