If the thought of spending a lot of time on researching the market and performing due diligence does not appeal to you then flipping houses for a living is probably not for you. Not performing the appropriate research and due diligence is a recipe for disaster.
I have the t-shirt to prove this!
In my early days as a real estate investor a friend of mine in the business recommended that I invest in a couple of properties that were primed for fix and flip.
I wasn’t familiar with the area where these properties were located and instead of thoroughly checking everything out for myself, I decided to go with the recommendation of my friend.
This was a big mistake. It turned out that I paid far too much for these properties and that my friend had significantly underestimated the rehabbing costs involved.
As a result, I had to invest a great deal of time and effort into this “hands-off” house flipping project just to break even on my investment.
Am I saying that you should never trust the recommendations of others that have more experience than you do? No, I am not saying that.
What I am saying is that you have to perform your own research and due diligence to be confident that a “flip that house” opportunity is right for you.
Once you have decided which location you will look for good property flipping deals you need to thoroughly research the area. Even if you believe that you know the area really well you must do this.
Never assume anything when you are buying and flipping houses.
House prices vary considerably across the country. For some locations, buying a good property for $250,000 would be a very good deal whereas in other locations this price would be considered expensive.
Make it your business to know the market prices in the areas that you decide are the best for real estate flipping.
Here are some good questions to ask about any potential fix and flip location:
- What is the selling price for average properties in the area right now?
- What are lender owned properties (foreclosures etc.) selling for right now in the area?
- What is the average time to sell a property in your chosen area right now?
- Are some areas selling properties faster than others?
- What types of properties are selling the fastest (size, layouts etc)?
These are the main questions to ask but you can come up with more. Get out and about in your chosen area and gain a real understanding of the market.
Talk to realtors and other local experts about house prices and what is happening with the local economy.
I will discuss due diligence later in this guide. Always remember that you cannot do too much research if you want to be successful with flipping a house.
Your profits totally depend on you making the right decisions so keep this in mind at all times.