Putting Your Investments on Steroids Requires Proper Vision
Yesterday I got a call that was all too common. The gentlemen called to inquire about buying a property and fixing it to flip for profits. He shared the story about how the house across the street from him sold about 6 months ago and the buyer came in and remodeled it and now has it on the market for an 80K higher price than he paid for it. This of course excited him and he too wanted to get in on the action. I asked him what type of work was done to the house. His reply was “ I am not sure” as most of it was on the inside and he has not seen the place yet. He thought perhaps we could schedule a viewing so he could identify what was done and determine what indeed was done.
Learn and duplicate what works
I see this type of activity all too often. I always encourage people who truly want to invest in real estate to get involved. If this is a neighboring home that you see every day, you can easily stop over introduce yourself and learn everything you want to know firsthand. This is a great opportunity to learn a business model. One thing I have identified over the years is that most investors love to share their stories.
With a fix and flip going on down the street all he knows is what they paid for it and what they are selling it for and the 80k spread is what excited him and he wants to duplicate this. But what is he duplicating?
This flipper may be experienced and able to make a huge profit, or he may be new and making little to no profit and not knowing what expenses he put into the house, he may even wind up losing money.
If the renovations have been going on for 6 months, this may suggest this is an inexperienced flipper as most seasoned investors would know that time is money and sitting for 6 months without generating income does not fit their business models.
A better more lucrative way
Identify what you want from an investment. "I just want to make a lot of money" is a common response to this question and one that is not an investment strategy. With lack of focus you will get lack luster results.
Be purposeful and think of what you want as a long term outcome when establishing your criteria
Things like: What do you want to invest in; single family, multi families, distressed property, fix and flips, buy and holds? To be terrific you want to be specific. What types of properties and investment style excites you the most. As you identify this, you will be on your way to an investment that will be worth owning.
How will you pay or finance?
I always recommend to not even look at property until you have your cash or financing in place. The best deals move extremely quickly and you will want to move quickly on the good deals or you will lose them to the more seasoned, better prepared investor.
Establish your entity structure
Especially for buy and hold investments, you will want your LLC or trust, etc. set up. An accountant and an attorney can best assist you in establishing an entity that will both save you tax dollars as well as liability protection for your investments.
Create a plan
Create a plan for yourself and share it with all your team members. Your Realtor, your accountant, your attorney, your trade’s people. If everyone you work with understands what you want to accomplish they can all have their eyes and ears open looking to help you find solutions to your investing wants and needs.
Want to talk about your investment strategy, schedule a one-on-one strategy call today!