Despite the pandemic, 2021 was a banner year for the U.S. housing market, with home sales in the Baltimore metropolitan area and across the nation at record high levels.
As a result, many people feel that now is the ideal time to buy, renovate and rehab a property and sell it at a profit. This practice is commonly referred to as “flipping,” a term with positive and negative connotations.
Josh Shein is a partner at Trius Lending Partners, one of the largest funders of investment property real estate loans in the region. He offers these five tips about flipping.
1. Research carefully to find the right property and contracting team
Finding the best property is obviously a huge challenge in the current marketplace. And in large part it’s going to depend on networking and relationships. Just looking online at sites such as Zillow is not really going to work. The market’s too tight.
Your best bet is going to the personal relationships within your network and realtors who might have specific insights.
Another challenge will be finding a general contractor. Again, we suggest relying on your personal network of people whom you trust and avoid contractors who demand the majority of the payment up front.
2. Think about whether you want to be a landlord or sell the property quickly
There are different approaches. Sometimes the answer is, I don’t know what I want to do.
The market will help you decide. The property you find will help you decide depending on what you buy and how much work it needs, where it is, how much time, energy, effort and money that you feel you can put into it.
A property purchased as a flip, might turn out to be a better investment as a long-term rental property.
3. Determine how active you want to be in the process
Again, people have different styles. Think about whether you want to be that person who rushes to address a plumbing issue, or whether you can depend on a general contractor or manager to handle the issues that can emerge.
4. Carefully evaluate the size of the investment that you can make
Expect costs to increase. We all know that once we begin a construction or renovation project, unforeseen costs emerge. Work with your lender to determine the amount of money needed initially and be careful to not spend all of your available funds on the acquisition. Be sure that you have enough capital to fund the process.
The other thing to think about is whether you have enough money. Do you have enough reserves and enough cash to get into real estate and really not have to worry about it? I don’t pretend to be an investment advisor, but I know enough to understand that diversification and hedging risk is important in anything we do.
And so the question is, do you have available funds so that you can take on risk comfortably?
5. It’s not ‘get rich quick’
It’s a marathon and not a sprint. The process is extremely challenging and time-consuming. I don’t want to discourage someone from getting involved because I believe in it, but I also want to be very realistic and honest about all that it entails.
Many people get involved with real estate in addition to their full-time jobs and shouldn’t leave their jobs — maybe ever. That means a lot of long nights and weekends finding opportunities, driving around neighborhoods, doing their homework and networking to stay current. Hopefully not a lot of sleepless nights, but there may be a few because there will be stress.
In the long run, it most often pays off. And that’s the key with real estate, you have to be able to ride through the ups and downs. Maybe eventually you’ll have enough to buy that beach house, but it’s not going to be immediate.
Some people conjure up negative images when they hear the word flipping, but if you look at HGTV these days, many of the most popular shows are dedicated to the rewards of renovating and flipping properties.
Real estate investing, especially at the entry level, does have a lot of unsavory characters and you must be careful about with whom you choose to work. But if you do your homework, select the right people and carefully evaluate all aspects of the process, investing in real estate can be extremely lucrative and fulfilling.
And the market of course, has never been better.
In the Democratic primary for the 6th District congressional seat, Joe Vogel, 27, finished second behind April McClain Delaney.
The repurposed historic synagogue will serve as a center of Jewish learning and community engagement.
The Prince George's County Executive will face her GOP rival, former Gov. Larry Hogan, in November..
Even before he had fully flushed out the business model for his dog-friendly bar Bark Social, Luke Silverman turned to Nemphos Braue LLC for guidance.