So, you want to be a rehabber and make money by flipping homes? I might be biased, but I think it’s a terrific idea. Investing in real estate has made many people wealthy. At the very minimum, it helped intelligent real estate investors grow their nest egg in preparation for their retirement or earn extra money to supplement their annual income. However, before you start shopping for an investment property and rehab loans in DC, MD and VA, let’s talk about what it takes to be a real estate flipper.
Like in everything else in life, there are no free lunches in real estate investing. Please do not believe those “gurus” who assure you that anyone can be a real estate investor, and it’s easy and risk free (typically, such statements are followed by asking you to pay them). At New Funding Resources we believe that you will need at least five things to succeed in this arena:
It might sound obvious, but you need to have tremendous motivation in order to succeed in this business. Not only being a dreamer, but also being willing to give up something for that dream. I’ve just talked to one very experienced borrower of ours. He and his team just finished up an upscale rehab in Chevy Chase, MD. What is impressive that they were able to do it all in less than four months. This is not an easy fit for such scale renovation. He was very proud. And he was pumped up. And he was exhausted. He had a good team and an experienced partner, but both he and his partner still had to be at the property as early as 4 am. Are you ready to give up your Saturdays and Sundays to do manual labor on your property?
Grit is not only about getting up at 4 am. Real estate prices in the DMV area are pretty high. Are you ready to put yourself on a budget and tighten your belt so you have enough cash to qualify for rehab loans? Last, but not least: Are you ready to give up your peace of mind and assume a responsibility for a multitude of things that might go wrong during the rehab process?
Let’s assume you answered all questions above affirmatively. Now it’s time for a reality check. Do you have enough time to invest in this rehab? Is this transaction going to be your primary focus? Let’s assume you are already employed and are experiencing a slower period at work. Will you be able to keep up with this project once things get busy? The reality is that you might have all the motivation in the world, but current circumstances in your life are just not right to take on a big project like this. If this is the case, please wait until something changes and you will be in a better position to make a profit and enjoy yourself in the process.
Good Support System.
Now we’ve determined that you have time and motivation to tackle a rehab project. It means that it’s time to assemble a team that will be a virtual wind underneath your wings. At minimum your team needs to include a lender who specializes in rehab loans in DC and surrounding areas, a real estate agent, a title company and an honest and responsible contractor you can trust. The goal of your team is to help you maximize your profits and keep you from costly mistakes. Check out our previous blog post about selecting the right agent for real estate investors.
To be honest, it is hard to be a real estate investor without having anything to invest. Rehab loans in and around DC will require you to bring money into the transaction. It shows a rehab lender that you are a responsible saver and that you believe in the transaction by being willing to share some of the risk. We call it having skin in the game. Click here to read more about the importance of seed money for rehab loans in DC, Maryland and Virginia.
We’ve worked with all types of rehabbers and loaned money successfully to real estate investors who have no real estate experience to those who renovated hundreds of homes. Real estate investing experience is a big plus, but not a requirement. With enough motivation, common sense and a great team, even a novice investor can make a good profit. Where we become concerned though is when we see an applicant who never owned a home before. Really? Isn’t it like opening a restaurant before having cooked anything in your life? This isn’t a lack of experience, but a lack of common sense.
We live in the area that offers wonderful opportunities for real estate investors. New Funding Resources has funded hundreds of rehab loans in Maryland, Virginia, and Washington, DC. To find out more how our financing can help you, please call us today or fill in our online application.