Every real estate investment deal comes with its own set of unique challenges that buyers have to overcome. Three common issues buyers in California face are lack of capital, tight deadlines and slim profit margins. For most, that's part of the allure. These individuals thrive on the adrenaline rush that comes from turning an investment property into profit quickly and with as little capital as possible.
Lack of Capital
While working on a shoestring budget might work in some instances, the reality is, you need capital to invest in real estate. Buyers that are cash-strapped and credit challenged face steep obstacles when it comes to obtaining loans from traditional lenders. The solution for many is to rely upon a hard money lender. These non-traditional loans are not based solely upon an individual's credit history and repayment ability. Hard money lenders also examine the feasibility of the investment to profit, as well as the experience and knowledge of the borrower.
When investing in fix and flip properties, time is of the essence. Investors set a deadline for repairs and remodeling to be complete so that the home can be put on the market. This can range anywhere from a few weeks, to a few months, depending upon the property and the extent of the work to be completed. For investors with minimal capital reserves, everything rides upon the home being sold so the money can be reinvested elsewhere. It requires a great deal of cooperation between the investor, contractors, inspectors and real estate professionals to meet these tight deadlines.
Slim Profit Margins
There are those that will have you believe that every real estate investor makes a huge profit when they fix and flip a home. The truth is investors often work on very narrow profit margins. Most often, the homes they buy are sold at public auction due to foreclosure or tax sale. Very often, they are abandoned, neglected and in need of updating and repairs. However, surprises lurk around every corner and it's quite common to run into major issues that bite into profits. Smart investors always pad the budget, as a sort of insurance policy, however, even the best prepared sometimes take a hit.
In order to be a successful real estate investor, you have to be a bit of a daredevil. You can't just sit on the sidelines, hoping for the deal of a lifetime to land at your feet. If you're serious about fixing and flipping properties, and you're having trouble financing your project, contact us. We understand the issues that buyers like you face, and we are here to help you meet those challenges head on.