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Don’t Become the Next Rehabbing Horror Story
There is a lot of money to be made from investing in real estate but there are risks for those who fail to approach it the right way…
Wholesaling real estate will always be a great way to cash in on real estate investing quickly and for minimizing risks but there are also obviously opportunities and attraction to rehabbing too.
Fixing and flipping or renting investment properties has been made out to be incredibly easy and appealing by reality TV. However, in reality it isn’t without its pitfalls and you can’t just change the channel if it all starts going wrong.
A big part of staying out of trouble is common sense though it is absolutely essential to invest in a good real estate education. A good, up to date and effective program will easily pay for itself in the first deal, not to mention saving a ton of cash on Rogaine and sleep aids compared to those who just try to wing it.
Take a look at one nightmare scenario recently played out by an ‘investor’ who tried to jump in without the right real estate investing education and has been blowing up the online forums in search for help. A couple seized on an opportunity to buy a $26,000 property which was badly in need of repairs and was almost 100 years old. Neglecting to do their own due diligence or research on the market they have so far plowed an additional $75,000 into the ‘deal’ in repairs which they borrowed on credit cards and still don’t have it into livable condition. Now it can’t be rented and even if it could, wouldn’t cash flow and they are probably deeper into debt on the property than they can sell for, if they could sell it in its current condition.
Of course most people reading this are probably shaking their heads and would never make such a chain of mistakes, especially with so many better opportunities out there. However, there are some critical lessons here which are essential reminders to new and existing real estate investors.
Besides the fact that this property sounded like a dud from the start and this couple could have probably built a brand new home for that cash from the ground up, never rely on repair estimates or potential resale value or rental amounts from sellers.
Always complete your own due diligence and get a variety of quotes on work to be done, always have home inspections done upfront and know exactly what a property can rent or sell for, if not even pre-selling or renting it before buying.
Always go in with a clear exit strategy and back up options and don’t tap out your credit cards, crushing your credit score so that you cannot even refinance the home.
Lastly recognize this is an excellent sign for educated real estate investors that there are plenty of people out there today with access to plenty of cash and who want to invest in real estate but who desperately need your help to do it right. Find them and collaborate using their cash and your expertise.