Traps To Avoid In Wholesale Real Estate Investing- By: Simon Macharia
Flipping houses, popularly called wholesaling houses, is the easiest way to generate cash in real estate investing. Little to no upfront money is needed for each deal when wholesaling houses.
To avoid failure as a real estate investor, here are a few things you must never do when flipping houses.
- Do not buy in shanty neighborhoods
Few people or real estate investors would like to buy houses in risky neighborhoods. Keep away from buying in these areas if you want to sell your houses fast and easy.
Identify neighborhoods that are neat, attractive, nice, yet inexpensive.
- Do not fail to thoroughly check the house
Start with an informal inspection. Pay particular attention to exterior appearance of the house, since this is the first thing a buyer sees. This is important.
- Never get generous on comparable sales
The more conservative you are at estimating fair market value when you buy, the less likely you are to make a high offer that leaves no profits for you or your real estate investor buyer that you wholesale the house to.
- Never under-estimate repairs
The repair estimates you make determine the profits you or your wholesale real estate investor buyer makes. Do not get conservative with repair estimates or you will pay too much when you buy.
- Do not pay too much when you buy
You might think this sounds obvious, but this is the most common real estate investing mistake. Of course you have done your due diligence with conservative sales value, generous repair estimates and equity before you buy.
Before you make your offer, you must put into consideration how much profit you are looking for. This way you are protected from a generous offer. I by no means shy away from letting the seller know that even though my profit might seem high to him, I must give a big discount when I sell my houses to sell them fast.
This works wonders in a buyers market.
- Never break your budget
In flipping houses, the goal is not to do any repairs, but to pass this on to the wholesale real estate investor buyer.
Every so often, you may find it crucial to do some light fixing up, such as hauling off trash cleaning up the yard, or such light tasks that make the house more visually appealing for sale.
Even though the goal is to flip the house to another real estate investor, at times it is crucial to fix modest jobs that could blow up estimated repair costs that could eat up into your profits.
Stick to a tight budget. The more generous you get the less your profits.
- Do not keep all the profits to yourself
The intention of every real estate investor when they buy any house is to make a profit. When you do your math, you have to take into consideration the fact that you have to make a profit, and the real estate investor you sell to must make his profit too.
As long as there is room for your profits and your real estate investor buyer, you will flip houses successfully.
Once you stick with these rules, you will be successfully as a wholesale real estate investor.
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Simon Macharia buys and sells houses in Dallas TX. He particularly likes to flip houses, running and automating his business through his real estate investing website.