Though the internet is a wonderful source of information on virtually any subject imaginable – including fix-and-flip real estate investing – there’s a lot of it to sort through and not all of it is accurate. Below are five of the biggest myths that seem to pervade fix-and-flip home investing and the facts that every everyone should have.
Myth #1 – Only the Wealthy Can Invest in Real Estate
Though real estate investing certainly is simpler when you have money at your disposal, it is not a necessary resource. In fact, some of the most successful fix-and-flip real estate investors got their start with loans. Through careful planning, and over the course of a few successful projects, they generated enough profit to pay for properties upfront rather than relying on loans.
Myth #2 – You Should Sell Your Property Immediately After Renovating
Of all the myths circulating the internet, this is one of the most common. You’ve probably heard that things like taxes, insurance, and even the likelihood of vandalism are expenses that will stack up over time, so it’s best to sell the property immediately after completing renovations. This is simply not always true. In some cases, it may be better to hold onto the property for a time – especially if you expect it to appreciate in value. If new businesses and jobs are coming to an area where you own a property, or if new parks or other attractions are on the horizon for the neighborhood, holding the property for a short time could very well net you a much higher profit.
Myth #3 – You Need Construction Knowledge and/or Experience
Again, though having some knowledge of the construction industry can certainly benefit you as a fix-and-flip real estate investor, it isn’t at all necessary. What is necessary, however, is a trusted team of contractors. Ideally, you will want a contractor to look over a property before you buy it so that you can better understand what will go into renovating it. Things like roof that is in disrepair or a crack in the foundation can have a devastating effect on your project (and your budget), so if you don’t have much knowledge or experience with construction, make sure you hire a reputable contractor who does.
Myth #4 – Fix-and-Flip Investing is Risky
With any form of investing, whether you choose the stock market, venture capital, or fix-and-flip real estate investing, there is always some inherent risk. Comparatively, real estate investing carries far less risk than investing in stocks or trading options, and it can be incredibly profitable when you learn how to mitigate your risks. This includes financing only what you can afford to finance, screening your renters very carefully, keeping on top of updates in the real estate market, and having a trusted real estate agent and contractor on your side among other things.
Myth #5 – You Have to Update the Entire House
This is one of the most common myths that first-time and less experienced flippers seem to believe, and though it won’t always lead to a failed project, it certainly can cut into your profits. When it comes to renovating a home, it’s important to stick to a budget, and that often means picking and choosing what to renovate. Think about the things that will improve the value of the home the most; this may include modernizing the kitchen and appliances, redoing the master bathroom, improving the home’s insulation, or even putting some new siding or paint on the home’s exterior. Then, once you have the most important renovations finished, you can use anything left in your budget to complete further upgrades.
The myths surrounding fix-and-flip real estate investing are common, but they are also easily debunked. Whether you need help finding funding, mitigating your risk, or choosing what you should update, you can find trusted professionals who are experts in these fields. By separating fact from fiction, it’s possible to be a highly successful flipper – even if it’s your first project.
