Watching home improvement shows and real estate shows may have contributed to the glamorization of house flipping. The truth is that flipping houses in Albuquerque can be a frustrating and difficult endeavor. Even though some house flippers have a great deal of success, there are also many challenges that they have to deal with.
If you are considering starting out in the flipping world, be realistic about the challenges ahead. This will help you prepare better for the future.
The following are some of the biggest challenges you might encounter when flipping a property.
Finding the Right Property
For flipping purposes, many homes in Albuquerque are not a good investment. The key is to find a neighborhood that will appeal to buyers, but the properties you choose must be priced below the market value in that area. Flipping a house involves selling quickly, not letting it appreciate slowly.
Searching for probate properties, attending auctions, and keeping tabs on foreclosures are some of the ways you can find properties that you can flip. Other options include tax lien properties, wholesale properties, and short sales.
Before bidding on a property, you need to do the math to determine the highest price you can pay. When you buy a home, you have to consider the property’s actual value, the market’s condition, comparable home prices, and how much repairs and upgrades will cost. These considerations have to be weighed against the possible listing price.
Funding
If you cannot pay cash for properties, you automatically put yourself at a disadvantage. It doesn’t mean you can’t work around it, but you should keep it in mind. For real estate investors, it is not uncommon to be required to make a significant down payment of 25% or more.
Besides coming up with the cash for the purchase, you also have to pay the contractors, maintain the utility bills, and pay closing costs.
Besides planning for everything above, you will also need a contingency plan for when things don’t go as planned.
You could use equity from a rental property you already own or get private funding from an investor. Otherwise, your two primary options are a traditional lender or using your own cash, both of which have risks.
Delays
A delay on a project can be extremely frustrating if you’re an investor. It is possible that your contractors have other projects on the go, materials may not arrive on time, or machines and equipment may malfunction.
Once there’s one delay, it often creates a ripple effect.
It’s important not to rely on just one person or company for everything, as this can lead to delays. Verify contractors carefully and realize that cheaper isn’t always better. Even with the best planning, some delays will still occur. So, always have a backup plan for everything.
Unexpected expenses
When you’re flipping a house, you’ll likely be forced to tap into your contingency cushion, as we discussed above.
Perhaps you didn’t realize there was mold behind a wall, or perhaps a pipe burst unexpectedly in the wall. Weather and delays can also contribute to expenses you didn’t initially account for.
You can plan for the unexpected by budgeting ahead of time.
Not Understanding the Market
In addition, if you’re planning to flip a house, you need to understand the market in Albuquerque, which isn’t easy. Knowing what’s happening in the market at any given time takes time, experience, and research. It just doesn’t make sense to many new flippers, but they still jump in anyway.
It’s not always the right time to start a new project. Perhaps demand is low or mortgage rates are high. Local issues can also come into play. The trends you are already immersed in can’t just be considered. Those who are good flippers stay on top of trends, and they can time their purchases and flips accordingly. Local house inventory levels, mortgage rate trends, and property values are all important factors to understand.
The right local realtor can help you a lot in understanding local housing conditions. Sandi Pressley and her team are the most experienced real estate team in Albuquerque. You can rely on them to help you find the right home for sale, no matter if you plan to flip it or make it your forever home.
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