I’ve expressed a couple times in the past on my blog that I’m not a big fan of real estate flipping, and that is totally about my own level of risk tolerance. However, The Canadian Real Estate Wealth Magazine published an interesting article with “The Top 10 Tips For Would-Be Flippers” and it’s interesting because those tips that they’ve put in there are specifically to reduce the risks that concern me about real estate flipping.
1. Secure Financing Before You Look At Houses
The first thing they mention is to secure financing before you look at the houses and the reason why that’s important is because if you do find a good property to flip, the chances are there’s ten people behind you looking at the same house. You need to be able to close quickly if you want to get a great deal on a house worth flipping. If you aren’t bringing something to the table that the guy behind you is, then you may be out of luck.
2. Know Your Market
The next highlight of the article is when they talk about choosing a specific neighborhood and sticking to it. You really need to know your market inside and out to be successful, especially when it comes to a flip. When I talked about flipping before, I discussed the importance of having multiple exit strategies. What are you going to do if the original plan doesn’t work out?
3. Line Up Your Trades
In a flipping situation, it’s all about time. The longer you hold the property, the more it’s costing you. Make sure you have all your workers and crew lined up well in advance so things run efficiently.
4. Don’t Pay For Someone Else’s Renovations
A lot of times you’ll look at a property and they’ve done renovations that really don’t enhance the value of the property. Just because they’ve done the renovations, doesn’t necessarily mean the value of the property increases. Be careful!
5. Be Clear On What You Aim To Achieve & Run Your Numbers
My comment on this is simple: run your numbers, run your numbers and run your numbers. Make sure you’ve got your goal written down and you follow it regularly.
About the Author
Ken Davidson is a Chartered Accountant with BDO Canada LLP, a local Kelowna accounting firm. Ken specializes in helping Kelowna businesses that are ready to take their revenues to the next level. Ken is best known for his strategic planning advice that positions him as a trusted advisor. To learn more about Ken visit his blog at http://BusinessGrowthStrategies.ca. To contact Ken for a Strategic Business Review to learn how he may be able to help your Kelowna business, email him at kdavidson@bdo.ca.
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