People who successfully flip houses for a living often have an experienced full-time construction team moving directly from one house to the next. If you’re flipping only the occasional house, you’ll have months between houses, and your team will drift away. You’ll have to rebuild it, costing time and, ultimately, money.
In addition, if you’re going to flip, you’ll need a real estate agent on your team. Otherwise, you’ll be paying 6 percent of the sales price every time you sell. If you’re holding long term, appreciation can offset that cost. If you’re not, the selling agent may be the only one who makes money.
Find a mentor: When I graduated from college, I was eager to learn as much as possible about investing in real estate. I read a few books, then found the best possible mentor: my landlord. He owned more than 100 rental houses, so as often as I could, I followed him around asking as many questions as I felt he would tolerate.
Of all the tips offered here, this is the most important. No matter what you want to succeed in, the single best thing you can do is find someone who’s been there, done that. Then ask questions until they either teach you what they know or they get a restraining order.
Timing and location: I live in South Florida, so I witnessed one of the best — and worst — house-flipping markets in the history of the world. Leading up to the housing implosion of 2007, even a moron could make money, because housing prices were escalating at a feverish pace. After the bubble burst, however, even a genius couldn’t break even because prices were plummeting.
Obviously, as with stocks, a rapidly rising market is where the easy money is. But if you know your stuff, a stable market is also fine. Just don’t ever buy in cities where employment, and thus population, is shrinking. When that’s happening (think Detroit), supply will outstrip demand, and there’s nowhere for real estate prices to go but down.
Don’t be discouraged
If I’ve made the process of buying and selling property appear complicated and/or dangerous, that wasn’t my intention. This isn’t rocket science, and I’d encourage anyone with an interest to pursue it. All I ask is that you go into it with your eyes open and do lots of learning before you attempt to do any earning.
What is your experience with investing in real estate? Share with us in comments below or on our Facebook page.
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I founded Money Talks News in 1991. I’m a CPA and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate. I’ve been investing in both stocks and property for more than 35 years.
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