House flipping tips for the newbie residential real estate investor

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“House flipping” has gained mainstream popularity thanks to the success of TV shows such as “Homes under the Hammer” and “Flipping Out.” Although these shows make it appear that house flipping is easy, it's not, and it is also, in fact, risky.

The following are some tips to help newbie residential real estate investors turn a profit on flipped houses.

Research 

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There's a reason most of those who are successful at flipping houses are the ones who have been in the real estate industry a long time. Flipping houses isn't just about finding a cheap house, fixing it, and selling it at a profit. Real estate investors eager to get into the house flipping craze should educate themselves on the ins and outs of their local real estate market, the intricacies of home equity lines of credit, mortgage loans and other home financing options, and the cost and effort involved in repairing and updating a home. All this information minimize risk and increases the chance of turning a profit.

Start only when financially ready 

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Flipping houses entails a lot of capital. Apart from the cost of acquiring a residential property, there are loan interest rates, property taxes, capital gains tax when selling above the purchase price, utilities,and renovation costs, not to mention advertising. Investors should factor all of these costs in the equation.

Look for quick-fix houses 

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The most flippable houses are those that don't need a lot of time or resources to get them ready for sale.

Houses with cosmetic defects such as chipped paint and pockmarked walls are relatively cheaper and easier to update and flip than homes with more extensive damage such as mold and plumbing issues. Many flippers are handy with a hammer themselves, and remodel their own for-sale properties to cut back on repair costs. Others are good at networking and have amassed a number of useful contacts in the plumbing, carpentry, electric, carpet-laying, and landscaping industries.

House flipping can be fun and rewarding, but real estate investors should be aware of the hard work and research it entails before pursuing it as a career.

For more articles and tips on investing in real estate, subscribe to this Steve Liefschultz of Equity Bank blog.

Diversifying your investment portfolio with commercial real estate assets

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A traditional real estate portfolio consists of investments made on personal real estate properties. Typically, investors are encouraged to place stocks on private assets because these are easier to maintain and control. Since these properties are mainly for personal use (that is, for someone to live in), there are less requirements and policies to consider after the initial down payment. This is generally good practice, but with the ever changing and fluctuating global market, many real estate advisors, such as Steve Liefschultz, suggest diversifying the portfolio to include commercial real estate assets.

By investing in commercial real estate, the investor significantly reduces any financial loss or risk that could be incurred in any market crisis. The secret to stable income from such investment lies in a well-balanced and maintained portfolio that is strong enough to counteract any type of fluctuation.

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Before anything else though, several main differences between commercial and residential properties have to be kept in mind. Some of these might be obvious, but the smart investor understands that calculated risks and judicious assessment assessment are always the plan. Here they are as compiled at Entrepreneur.com by Danielle Babb:

Commercial assets are valued differently. Commercial properties are sold based on their income from usable square footage.

Cash flow is greater. Commercial assets are normally leased to several tenants who help increase the yield per square foot than a standard single-family property.

Commercial leases are longer. This helps the investor’s cash flow since stability ensures a more balanced portfolio.

As with any investment, it is highly recommended that the investor do his or her research before buying anything. The legwork does not only include online studies but also actually talking to previous owners or managers, if possible. The personal stories of leases and their opinions on the specific property will prove priceless in the decision making.

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Steve Liefschultz of Equity Bank has helped hundreds of clients make better decisions regarding their real estate properties. For more information, please visit this website.