Cleveland is becoming known around the country and around the world as a “bounce back” city because of the dollars being invested in developments, great public schools, infrastructure, parks and public spaces. With all the economic growth happening in Cleveland, owning a piece of real estate property is a stable way to start earning passive income.
At CPD Homes, we have been doing just that for over 6 years- buying properties as an investment. We work to turn these properties into a beautiful home for it’s new owner. This process is called buying and flipping houses.
Buying to flip means that the investor has plans to buy a property below its current market value and resell it for a higher price. A higher value of a home occurs either when the housing market peaks, or after the investor has made renovations or upgrades. It is a form of real estate investment that involves purchasing a house or property, fixing it up and selling it quickly.
Flipping a real estate investment can be a very lucrative opportunity if it is done properly. Many house flippers will buy a house that is priced below market value and have the chance to gain large profits when it is re-sold. This quick profit opportunity can be achieved in a few months or less if you have the proper team available to flip the home and get it back on the market quickly.
During a house flipping project, you will have the opportunity to gain an immense amount of knowledge in a variety of fields. In most cases, house flipping requires a lot of physical work and upgrades, and if you are actively present during these changes or participating in the flipping then you will certainly gain valuable knowledge working with contractors.
Some of the fields you can become fairly comfortable in include home construction, local market trends, city laws and home staging. With all of this experience, you will learn how to sell a house fast.
As you become more practiced at house flipping and renovating, chances are you will begin to meet and connect with new people in the real estate world. As you begin to build your team of agents, appraisers and contractors, you will expand your network. Growing your network and partners will open up more opportunities in the future and your flips will become more efficient and more profitable.
As you begin to flip more houses, you will eventually develop a better eye for the best properties to flip. Gaining enough experience in flipping houses during your journey will help to develop the sense of knowing what homes promise a good return and which you are capable of flipping properly.
However, as with any new endeavor, there are challenges and hurdles to overcome. We have had our share over the years.
Let’s look at five mistakes to avoid if you want to find success in house flipping:
Working in real estate is an expensive project to undertake. Do not try to start flipping a house without having the necessary funds to do so. There are many expenses accrued with the buying and selling of a property, including:
(a) The property acquisition cost or the down payment. Yes, there are properties that are for sale by owner that do not require a down payment or requires only a low down payment amount. You may be able to buy the house through refinancing the acquisition; still, you may have to pay the interest. The interest amount should be figured into your sales price as you work out the numbers to see if the flip will make a profit or if it will break eve or worse- be negative.
(b) Property taxes, utilities, renovation costs and capital gains taxes. Again, these costs should be added to the sold price to for analysis.
The process involved in flipping a house can require a fair amount of time from the moment you begin looking to buy. It can take months just to find and buy the suitable property before you even begin renovations. Once you have purchased the home, there are many time-consuming processes that will arise throughout including contracting, renovating, inspections, cleaning, re-furnishing and more. It is also vital that you make sure the house is on par with the standards set by your local building & safety codes.
If the house is all up, renovated, inspected and ready to be sold, you will then have to put time and effort into selling it. The tasks of looking for buyers, advertising, and property showings will all require the dedication of your time. Make sure that you have properly allocated enough time for each stage, or delegate these laborious tasks to a trusted support team.
Licensed contractors, carpenters, and builders possess the necessary skills to properly renovate your house. However, if you have the qualifications and skills to complete these tasks safely and efficiently, then you you will increase your profit margin. Otherwise, leave it up to the professionals and save the headaches that can pop up down the road during buyer inspections.
Having knowledge of the local real estate market is a big factor in finding good deals that show strong potential in a house flip. As a house flipper, you have to be able to recognize properties that are suitable for flipping, where to look, and how much is the right amount to invest.
In addition, you should know what renovations will be required and which ones aren’t. Without knowledge of home building and all of the safety regulations, you’re going to have a very hard time creating a profitable investment.
This is a common mistake that house flippers commit- being impatient and rushing things in an attempt to earn profit right away. As we have stated, house flipping requires strenuous and time-consuming activities, not to mention professional knowledge and know-how.
Many have failed simply because they rush the process without considering the factors mentioned above for the sake of their potential buyers. Doing business in real estate requires you to have your buyer’s needs and safety in mind. Furthermore, if you lack the patience to do the job properly, then your profits will suffer. Take the time to do complete each stage of the flip properly.
When you are ready to get into house flipping, start by doing extensive research in the local area and understand comps and values. There are many advantages to accumulate gains on this type of real estate investment if you avoid the common mistakes that we’ve listed above for you to prevent loss of profit in the long run.