Ask Yourself These Questions Before You Submit an Offer
After weeks of searching, you just found the perfect property to flip and you are anxious to make an offer on it. Sound familiar? Often as a real estate investor, it’s easy to get caught up in the game of making offers on whatever deal comes your way. If you aren’t careful you could end up losing money or getting in over your head.
Before you do anything, you should ask yourself these questions to make sure you know what you are getting into before you make an offer. If a property’s not for you, it’s okay to pass on it. Other deals will always pop up in the future.
Whenever Tarek and I come across a good deal, we ask ourselves these questions. Doing so helps us determine if the property we found will be the best option for us and our business.
How Much Rehab Work Does the Property Require?
If a property you find does not need a lot of rehab or repair work, then chances are you aren’t going to be able to add much value to this property. Probably not one worth pursuing. Same goes for if a property needs so many repairs that it just ends up becoming a money sinkhole. Sure, you’ll be able to add value to the property, but you might just end up breaking even when it comes time to sell. Look for a property that you can rehab and add value to, but compare it to comps in the area to make sure you are paying the right amount for it.
Do I Actually Like the Property?
When a good deal comes your way, it might be tempting to make an offer right away. Regardless of your full workload, the perfect property is often hard to pass up. But before you get too carried away with making an offer on the property, you need to ask yourself what you actually like about this property and why it would be worth your time. If you are unsure of what you really like about the house, then you’ll want to remove any emotions and view it from an objective standpoint to determine if it’s one you should be pursuing.
Do I Have the Money?
When it comes to real estate investing, you have to pay attention to the numbers. Repair and rehab costs, closing costs, taxes, etc. are all expenses you will want to take into account before you make an offer on a property. It is easy to get into the trap of thinking that you can make any deal work for you and your business, but if the numbers don’t add up then you’re going to be in trouble later on. Make sure you will be able to cover the costs and that you can make a profit when it comes time to sell.
Is This a Good Neighborhood?
The neighborhood your potential flip is located in is an important factor – one that you need to be very comfortable with. Don’t get stuck with a property that is in a bad neighborhood, as no buyers will even bother with your flip when you list it. The most attractive neighborhoods to many buyers will have all the amenities located nearby. This is certainly a neighborhood you will want to consider when searching for properties.
Since every neighborhood has their pros and cons, you’ll want to weigh the pros and cons to determine if the property is really the best option for you.
Am I Ready to Take on This Flip?
Before you consider taking on another flip, you’ll need to decide if you and your team are ready for more work. If you are, and you’ve answered the rest of these questions without any red flags, then you are in the green to make an offer. If you aren’t, you might want to think twice before making an offer on a property. When you aren’t ready for work, you’ll end up losing money as the project will most likely take longer than it should.
Review these questions before you make an offer on any property, no matter how great the deal is. No matter how you answer these questions, they will guarantee that you will be comfortable with your decision in the end.
For more information about real estate investing, visit Real Estate Elevated's BiggerPockets blog.