Getting started in real estate investment isn’t for the faint of heart. It takes courage, knowledge, guidance, and most of all…money! It has been said that you can’t take a long journey without taking that first step, but where should you start if you are trying to break into the fix-n-flip business. Here are 7 things you will need to think about before you start your flipping adventure:
- What You Do Know?: I’ve worked with general contractors that decided to start flipping houses and I’ve worked with people that don’t know the first thing about real estate. The key is to “know thyself.” What are your strengths? What are your weaknesses? Do you know construction? Do you have a background in finance? Do you have tons of cash at your disposal? Figure out what you know and don’t know and seek to fill in the blanks.
- What team do I assemble?: Did Nick Fury take on Thanos alone? No. He assembled the Avengers. In order to start a fix-n-flip business, you’ll need to assemble your own team of super heroes…your very own Real Estate Avengers. Instead of Thor, you’ll need a great contractor. A great real estate attorney will become your very own Tony Stark and a top-notch real estate agent that knows the market is your Black Widow. No one knows everything. No one can be everywhere at once. A huge key to building a successful business is to know when to delegate. Of all of your assets, your time is the most important asset you have. Know how to use assemble a team of super heroes and know how to use them.
- Where are You Financially? Are you the heir to a dot-com fortune or are you barely scraping by? Do you have an 800 credit score or do you have charge-offs all over your credit report. Understanding where you are financially will allow you to plan what to do next. You might need to find friends, family, or an angel investor to help you on your way. Diving in without having your financial house in order, however, can lead to tragic results.
- How will you finance your deals? Here’s a little secret. Banks hate providing loans to investors. Bankers are programmed to see real estate investors as a lower form of life. There are, however, several ways to leverage, or borrow money, for your real estate investments. Often times, however, those loans can eat up all of your potential profits. Understanding your “financial stack” is very important and should not be ignored.
- How should I structure my business?: Should you buy your first property in your name, set up an LLC, or create a trust? Will you have partners or go it alone? What paperwork and filings will you need to do to be “legal”? Your business structure will impact your ability to get financing, taxation, banking, and many other issues. Choose wisely.
- How do I find deals?: Finding deals is easy. Finding good deals is another thing entirely. Even the most seasoned real estate investors struggle to fill their pipelines. As a new investor, you might be tempted to jump in and grab the first deal that crosses your computer screen. You need to be sure you understand what you are looking at. Finding trusted advisors to help you hunt down great deals will make or break your flipping business. You just have to know where to look.
- Who can be my Sherpa?: You wouldn’t climb a mountain without a seasoned guide that knows the terrain. Why would you undertake your first flip without having a shepherd to bounce questions off of? Someone that has been there, done that, and bought the tee shirt will keep you out of the poor house. Find a trusted Sherpa and listen to them.
The answers to these questions will vary from investor to investor. They are also not the only questions you should ask when preparing to enter the world of real estate investment. Find a good, experienced advisor to bounce thoughts off of. You will certainly be glad you did.