Flipping real estate is a major investment that has become popular not only due to its profit potential but for the enjoyment of turning an ugly duckling into a swan. However, there are rules that must be followed to ensure a successful flip.
What You Need to Know
Investors in foreclosed properties must educate themselves about financing and have a comprehensive knowledge of the local housing market they are buying into. They need to research the neighborhood surrounding the foreclosure property to view what types of homes are selling the fastest. Types of properties to pay attention to are multifamily dwellings like duplexes, apartment and condominium complexes and single residences.
The investor must learn about financing investment properties and know that investing in flipping homes is a bit different from traditional real estate investments. The financial plan must include the best way to finance the purchase with the added condition of maximizing profit when the property is ready for sale. Possible financing options are remortgaging an existing asset or obtaining a home equity line of credit.
Financing anything always requires a good credit score to obtain the best terms. A low credit score can be improved in many ways. It’s a good idea to have the highest possible score before searching out financial options.
Building a Team
It may be wise to consider an investment partner to help get through the challenges that will most certainly arise with flipping foreclosed properties. Ideally, an experienced real estate investor and foreclosure flipper would be the best collaborator.
A real estate investment network is not easy to build but it may be the most important asset a successful foreclosed home flipper can have. The network should include:
- Credit advisor or mortgage broker
- Real estate attorney
- Trusted and experienced general contractor
- Property appraiser
- Insurance agent
- Title company
This may seem like an expensive group of advisors, but bear in mind, they are on-call to be sought only when their services are required. They need to be trusted acquaintances that are familiar enough with your business that they will offer assistance immediately when called upon. Building and maintaining relationships with the network is an essential part of the flipper’s success.
All investments involve risk, but foreclosed home flipping is more fun than most because unlike stocks and bonds, it is a hands-on adventure where investors can clearly see the result of their efforts.