Time to Get Your Mind Right for Investing! (Part 2)

Today, we continue our two-part look at the first five things to remember when you think you have found a deal. (To read the first article, please click here.) There are quite a lot of things to look at, but I would argue that these five are paramount. Investing is not a get-rich-quick type of business. Sure, there are times when you can find a quick and profitable deal, but those are not the norm. Most of the time, you are looking at putting in some serious time and patience. Make sure you have plenty of both to do it right. Good strategy and a solid plan help, but sometimes real estate transactions take on a life of their own, which is why we do our best to help you manage your risk.

Position Your Fix and Flip for Success by Considering Your Own Limitations

The fourth thing to remember is your own limitations. Do you have the skills to pull this renovation off? I am talking not only about hard skills such as carpentry and plumbing but also soft skills such as research, negotiation, and marketing. For to be a successful rehabber, you will need to wear many hats.

So, what do you do if you don’t have a particular skill set? Should you give up on the entire idea? Of course not. Every investor had to start somewhere. Some succeeded with their first fix-and-flip and went on to have many more. Others realized that this business might not be for them and faded away. Both categories of investors lacked experience initially, but those who succeeded had something else going for them that helped them overcome that issue. What is it?

Be Honest with Yourself

First of all, it’s honesty. It’s the ability to admit to yourself that you might be lacking in one or several areas. There is no shame in it. For example, let’s assume you are a rehabber trying to break into real estate investing. You have construction expertise and a reliable crew. You’re halfway to success already. However, you might not know how to find discounted properties or how to evaluate each investment opportunity. Until you gain experience, these are your weaknesses, and this is where you need to concentrate your energies.

First of all, you need to be able to find experts who can help guide you while you are learning. These experts need to be someone you can trust. For example, we see many successful couples when the husband owns a construction business and the wife is a licensed real estate agent. This is an ideal combination, but I do realize it’s not always possible. Another option is to find experts whose financial interests are aligned with yours. One of these experts is a hard money lender funding your transaction.

I am not touting my horn, but unlike real estate agents who are perennially optimistic about every property’s potential, we as lenders have to turn a sober and critical eye at each transaction that comes our way. If we are too optimistic, we might expose ourselves to excessive risk and losses. If we are too conservative, we might miss out on good business that will be funded by competition. In other words, we are trying to strike the same balance that our borrowers: as a real estate investor, you don’t want to overpay, and, on the other hand, you don’t want to miss an investment opportunity. The difference is that because of the sheer volume of transactions we are involved with, we can fine-tune and adjust our underwriting criteria. A typical investor will have much limited view. The good news, though, is that we openly share our expertise.

If you have gone through this checklist and believe you have the makings of a great deal, give us a call at 240.436.2340. New Funding Resources is a premier provider of private financing for rehab and fix and flip loans in Virginia, Washington, DC, and Maryland. Let’s help you analyze your deal and increase your chances for success.