Commercial real estate investing basics

House flipping is one of those things that seems so easy when you are looking at it from the outside in. How hard can it be to buy a house, fix it up with the help of renovation financing and sell it off again so you can pay of the renovation lending and make a huge profit? Well, the problem is that it’s risky, difficult, complicated work and if you don’t know what you are doing then you could be in for a bad break. So, what do you need to start?

  • The first thing that you need is near perfect credit. Unfortunately investment mortgage lenders have really tightened up their systems and trying to get renovation lending can be very difficult, especially if the house you want is pretty high risk, meaning there’s no guarantee that it will sell quickly.
  • Something else you’ll need is cash. You can’t rely completely on renovation lending. You should use the cash for your down payment so you won’t have to worry about paying a PMI, or private mortgage insurance on a second mortgage. If you are trying to buy a cheap house in an auction or something like that then if you qualify, you could take out a home equity line of credit. This will pay for the renovations, fees and closing costs.

  • You need to have a pretty good understanding of the real estate market and residential and commercial real estate investing basics. This is so that you buy a house that is in a good location. If you do that and can fix it up quickly, you’ll be able to sell it at a profit. The faster you can you sell, the more money you’ll make. Just like if it takes a long time to sell then you are going to lose money on the monthly mortgage payments, insurance payments, utilities and property taxes.

  • Know what to look for in a potential house flip. Here are some basics:
    • Location – This is one of the most important things. The home needs to be in a place where people want to live. This can be a challenge and finding out about good locations isn’t as easy as it seems. You should also take into account the school district that the home is in as well.
    • Condition – There’s no point in buying a home if you just have to tear it downa nd start from scratch. Find a home that is structurally sound. If you aren’t going to have an opportunity to have the home inspected, like at an auction, then you should bring someone who knows what to look for as far as the building, electricity and plumbing goes.
    • Fixes – If you only need to replace the carpet and take off the wall paper, the home is going to be cheap and easy to upgrade. However, if there are things needing to be done like replacing doors and walls or removing mold or replacing a roof- these are not easy fixes and require a lot of time and money. Consider the necessary fixes carefully.
    • Kitchen – This is the most important room of the house so it deserves it’s own bullet point. If you don’t get to see anything else, analyze the kitchen. Look into how much it will cost in renovation lending to upgrade the kitchen in order to make it attractive to potential buyers.
    • Value – The house needs to be below its value according to the local market. Buying a bad house in a good neighborhood is better and will probably be more successful than a good house in a bad neighborhood. A good neighborhood will ensure that it’s home go up in value but a bad neighborhood does nothing for the value of the home.
  • Your best bet if you really want to start flipping houses is to start by getting educated about the process and the real estate market and find a mentor. Start working with a successful house flipper so that you can learn from him or her. Offering some sort of incentive to your potential mentor is a good idea to.You could commit to paying them a percentage of your first sell, for example so that they will want to teach you.