Paper flipping houses (also known as Property Wholesaling or Wholesaling) can be an excellent way to get into real estate without all the hassle of physically renovating properties and hiring contractors. You’re essentially flipping contracts, not houses, which sounds easy, right? Well, while it’s simpler in some ways, there are still key mistakes many beginners make.
Let's discuss the top 5 mistakes to avoid when paper flipping houses so that you can stay profitable and successful!
1. Not Doing Proper Market Research
Many new paper flippers jump into a deal without fully understanding the market they’re working in. Skipping this step could mean overvaluing a property or picking a deal that doesn’t have enough potential buyers.
What you should do instead: Take the time to study the local real estate market. Talk to local realtors regarding the market. Know property values, buyer demand, and trends in your area. Tools like PropStream can be a huge help here!
2. Overestimating Property Value
It’s easy to get caught up in the numbers, thinking every deal will be a home run. But overestimating a property’s value will lead to deals that can’t close, leaving you stuck with a contract nobody wants and $0 in assignment fees.
What you should do instead: Be conservative in your estimates. Use comps (comparable properties) and get a second opinion from an experienced real estate professional.
3. Not Building a Buyer’s List
You’ve got a contract, but now what? Not having a list of ready buyers can cause deals to fall apart. Without interested buyers, your paper flip won’t succeed.
What you should do instead: Build a buyer’s list before you secure a contract. Put out yard signs & cold call. You can also network with investors, real estate agents, real estate investment groups, attend investment meetings, and develop a business relationship with flippers to find those ready to jump on a good deal.
4. Poor Contract Negotiation
If you don’t understand the details of the contract, you might agree to terms that don’t leave enough profit for you or the investor. Poor contract negotiation is a common mistake among beginners.
What you should do instead: Learn the basics of real estate contracts. Consider hiring an attorney or experienced mentor to help you navigate the first few deals.
5. Failing to Have an Exit Strategy
Every deal needs an exit strategy. What if the buyer backs out? Or if the market takes a downturn before you close the deal? Not having a clear plan can turn a profitable deal into a costly one.
What you should do instead: Always have multiple exit strategies. If Plan A doesn’t work, be ready to pivot to Plan B, whether it’s finding a new buyer, renegotiating the deal, or lowering your assignment fee to make the deal work.
Conclusion: Paper flipping houses can be a fantastic way to get into real estate without heavy financial commitments. However, avoiding these common mistakes will set you up for success. Do your homework, build connections, and always be prepared with an exit strategy, and you’ll be well on your way to flipping contracts like a pro!
The information in this article are the opinion and experience of the author. Due diligence should always be done when investing in real estate.
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