These days, flipping houses is all the rage. To have a fun side project or to pad their existing income, novice investors line up to bid on run-down homes they can fix up and put back on the market. Unfortunately, although investing in real estate can be profitable, making these two mistakes might destroy your new business:
1: Buying Property Sight-Unseen
When you hear about a house that is for sale, you might let your emotions get the best of you. Instead of driving to the property and analyzing the current condition, you might head straight to the auction house to beat out the other bidders. Unfortunately, buying a house without seeing it in person can cause a lot of problems later.
You never know when those pictures you saw of the house online were taken, or what the next-door neighbor's place looks like. What will you do if you spend several-hundred-thousand dollars on a house that sits across the street from an ugly gas station? What if the backyard has a pool that is filled with algae and broken tiles?
To avoid problems, try not to get into a hurry. Become familiar with the neighborhoods in your target investment neighborhoods so you can make decisions faster. If you can, visit the property and take pictures of potential issues so that you can estimate the cost of repairs. By making an educated decision, you can save yourself a lot of time, money, and frustration.
2: Skipping The Professional Home Inspection
Unfortunately, spending a few minutes at a potential property doesn't always give you the information that you need to make a good investment. Unless you work as a professional contractor, it might be easy to miss the symptoms of a broken septic tank or a damaged foundation.
To save yourself from investing in a money pit, never skip the professional home inspection. Ask your real estate agent to make all of your investment deals contingent on a successful home inspection. Home inspections typically cost between $200-$500, but the price pales in comparison to the potential expense of dealing with major repairs.
A home inspector will check for issues with the home's structure, plumbing, electrical systems, and even home appliances. After the inspector goes through the property, they will issue you a comprehensive report of their findings. You can use this information to negotiate a lower sales price or even to ask the sellers to make the necessary repairs.
By choosing the right investment property, you can keep your projects on track and avoid unplanned expenses. Consider contacting a real estate investment company, like Jakob Pek Fund, to see what your options are.