Investing in real estate property can lead to a nice payday, especially if you can lower your risks early on. As a real estate investor, be aware of these red flags whether you are planning to fix and flip or rent out an investment property.
5 Red Flags To Watch For in Property Investing
- Hidden expenses. Look for those ‘hidden’ expenses early on. Expenses or fees, such as a homeowner association fee or wholesaler fee, should be included in your calculations. You may be surprised how quickly these expenses can add up and change your payday.
- Inflated numbers. Review your numbers or any numbers provided to you and ensure calculations are conservation. To ensure you come out in the black, be conservative when determining the price to pay, rehab costs, potential net profit, etc.
- No homework. With the housing market rebounding, it’s critical to get the right property at the right price as a property investor. Do your homework. Know the comparables and ensure they’re the right comparables – not new construction. Understand strategy and know how to negotiate. Not having this information is a huge red flag.
- Little wiggle room. Factor in enough margin to cover unexpected rehab expenses. Something will come up, whether it’s unexpectedly replacing an air conditioner or finding a plumbing problem. Make sure you leave enough room for the unanticipated. And if you’re lucky to avoid these costs, it’s more profit in your pocket.
- Lack of mentors. With so many variables constantly shifting in property investing, the best investors learn from others and are networked in the real estate industry. Use a contractor, lender, agent, etc., who understands property investing. For example, a hard money lender specializes in short-term real estate backed loans. They understand the importance of moving quickly, having capital available and being open to properties in disrepair, unlike conventional lenders. Properties in poor condition are oftentimes the best opportunities for property investors, and those who understand investing can see the potential early on.
Catalyst Funding is a hard money lender who can help build your real estate investment opportunities. With a background in fix and flip projects and other property investments, we can provide resources and guidance to help you through the entire process. We strive to be more than a lender! For more information, contact Catalyst Funding online or call us at (832) 648-3626.