costly mistakes in fix and flipping

costly mistakes to avoid when investing in fix and flips in Colorado

At some time or another, an investor can fall a pray to common and costly mistakes. The fix and flip business is an area where you will find a considerable amount of chances for such mistakes. When it comes to investing in a fix and flip business (and with any other business), knowing what to do and doing what you know is the key aspect. Besides, it is also important to know what you shouldn’t do if you expect sustainable progress and write your success story in the business of fixing and flipping real estate.

-          Mistake 01: Having Unrealistic Expectations

The old saying is right, you shouldn’t be counting your chickens before they are hatched. There are considerable number of house flippers who spend too much of money and time on repairs with the expectation of compensating all that money from the selling price of the property. This is a very risky approach; you should always try to save money in all the possible ways without overspending. This doesn’t mean, however, that you should settle for cheaper, low quality materials; look for shops that sell materials for cheaper prices. You can expect discounts on bulk purchases. Try to initiate a partnership with a building materials supplier on long term basis. It is important to invest in fixing what will add value to the home. Make sure that the areas of the home that you are rehabbing will provide you with the value return on the sales price. In an existing home, there are any number of improvements that one can choose to make, but not all of them are considered equal in the way of a return on investment. There are many other ways for you to implement cost-effective strategies other than spending money hand over fist!

-          Mistake 02: Not Researching Enough

Some novice fix and flippers tend to focus on cheap fixers without paying much interest to the other facts. Just because you find a property for a very cheap price, that doesn’t mean that you can keep a huge profit margin when selling it back; you should do proper research about the area. The average property prices of the neighborhood, the willingness of the people to purchase properties from the respective neighborhood, the ability to match the average selling price once the repairing costs are added are some of the major concerns you must be aware of. Check out our other blogs to make sure you are evaluating all of your holding costs on a property correctly. Be conservative in your estimates so that you can have a positive end result.

-          Mistake 03: Avoiding ‘Creativity’ Factor

Impression does mean a lot when it comes to real-estate field. No matter how valuable the property you are going to sell, without a good impression, you can’t expect your buyers to like it and agree with the price you offer. With simple yet creative tweaks, you can give a whole new appearance to the property and increase the value significantly. However, being creative is not spending large amounts of money; it is something you can do by making the most of what you already have. In fact, the profitability of the flip and fix business depends on the way you utilize available resources. Make sure you also use the right Real Estate Agent to sell your property - you want them to be an expert in the neighborhood and prefer them to have buyers already waiting for a property to be delivered in that area. It is shocking to see what home staging can do for buyers. There is a reason that national home builders have model homes. Treat your home like a model to drive traffic to your real estate investment. 

You don’t always have to spend a ton to increase the value of a property. It is all about being creative and thinking out of the box. 

Purchasing Real Estate in Colorado - The Basics

Hi All!

From time to time we get clients who have not bought real estate before or maybe it's been a while and they are unsure of what the general process was. We thought a video would help! It's very basic taking you through the steps, but if you have any questions, feel free to contact us. We are here to help and lend to borrowers with all levels of experience!

invest without emotions

when investing in real estate, it is not an emotional decision such as when you purchase your home where you plan on living

It is always better to control the emotions when making the decisions related to investing in real estate. Obviously, rational thinking is better than the emotional thinking when it comes to actions related to money. If you put emotions first when dealing with financial matters, the potential of losing money increases particularly during the hard times. Therefore, as an investor, you should be able to recognize the behaviors that trigger your emotions related to investing.

common investing emotions you must overcome

            Urge to Follow the Crowd

One of the most common emotions related to investment is following the crowd. You might feel safe to do what others do in common. Nevertheless, apart from just doing what others do, you should depend on the analysis; if the analysis portrays ‘something is not-right’ it is better to be cautious instead of following the crowd. There are many folks who are getting into real estate, not everyone possesses the skill, time or work ethic to make sure their business are successful. A strategy might work for one, but not for you. There are many wholesalers who provide a valuable service in connecting distressed home sellers with the investors who can rehab a property and add value to the neighborhood. However, do not just rely on their estimations for rehab costs or after repair value. Please perform your own due diligence so that you can be confident in your investment.

Feeling of Overconfidence

At times things can go well for investors. Under such circumstances they can be lulled with an overconfidence of security. The "I can do no wrong" mindset can be dangerous in real estate investing. After several successful deals, one could lead themselves down a path for riskier projects and potential for losses. Losing the sense of concern is a common instance when the gains come easier.

If you happen to experience this feeling as an investor, you should re-think seriously your decisions and consider the actual consequences. Think of all the possibilities that would change the current market trends. Be ready with alternative solutions that might be useful in case of things going wrong against your decision. What has changed that could alter my rehab costs from project to project? Are there market changes? New happenings in the neighborhood that could work against me in my next project? Is demand steady to this area? Any number of things could change from project to project. It is always important to evaluate risks continuously.

Avoidance of Risk

It is a professional investor’s characteristic to concentrate on the assumed risks first. Parallel to this consideration, they put together risk management strategies too. Then there is time to examine potential return. Avoiding the potential risks when things going well, is dangerous move; long-term rally of good times is associated with the risk of reversal. Avoiding such risks is an indication of putting yourself into danger as an investor. The most effective way to stay away from such emotions is continuing your research and due diligence. Continue your risk assessment to work without fail. Deploy risk reduction strategies. Be sure to have a goal and stop where you should.

Remember that the economy in general and real estate is cyclical. Not every house that needs fixing is a good deal. There are many other factors to consider that we explore throughout our other blogs. 

Investors tend to forget the investing rules when things go well for them. Be the wise investor that recognizes the warnings signs and put yourself into the correct path to creating wealth through your real estate investments in Colorado. As always, ask us how hard money lending can help you accomplish your goals!

real estate vs. the stock market

Investing in real-estate Vs Stock Market

When it comes to long term financial plans, investments play an integral role. Besides all the other areas of expenditure, investing in a prospective field is a great way of increasing the financial resources. Real-estate and stock market are among the mostly targeted areas in terms of investing. Potential investors wonder whether they should invest in stock market or real-estate; this article reveals the facts related to both the options, so you can decide the best matching option for you. Under general circumstances, investing in real-estate is considered to be the best option by many investors; however, it may depend on the facts like personal interest and preference too.

Real Estate

One of the most obvious benefits of investing in real-estate is that it is that it is a physical property. Since it is a tangible asset, the owner can inhabit, renovate and sell whenever it is necessary. Also, owning a home is an important aspect for a person’s life; after all, it is a tangible aspect that is associated with a measure of success.

Apart from that, there are some other benefits associated with real-estate investment:

-          The chances for defrauding in this sort of an investment are fairly low. In fact, since it is a tangible aspect, you can evaluate the same thoroughly. You can see and assess the condition of the property and current value easily.

-          Leveraging the real-estate investment will be relatively safer compared to the stock market investments. 

-          In the event of inflation, real-estate investment will provide protection. As a matter of fact, inflation maximizes the value of the property parallel to the cost of living and the power of purchasing of the respective currency.

-          Even after the initial investment, you can develop the land and increase the return on the investment. This is exactly what happens during fix and flip business.

-          If necessary, you can immediately convert your investment into a revenue generator with leasing or rental agreements.

Stock Market

When it comes to stocks, investing on them is a riskier compared to real-estate. Things can become worse upon inflation in contrary to a real-estate investment. Nevertheless, mentioned below are some of the notable benefits of stock-market investments.

-          Investing in stock market is relatively effortless.

-          If you can end up with high-quality stocks, you can expect a good annual income 

-          You have the opportunity to reinvest the dividends.

Despite the mentioned benefits, stocks are associated with several drawbacks. These drawbacks has made stock market investing is a less attractive one compared to the real-estate market. The tumultuousness of the stock market during the complex economic situation will cause significant losses for the investor. Unpredictability and the necessity for sound knowledge in investing are other significant drawbacks pertaining to stock-market investing. 

TABS - The Basics

TABS, LLC - Hard Money Lender Colorado

Video Transcript:
Hi! I'm Alex Thomas with TABS. We are a Colorado Hard Money Lender. When you first get started in Real Estate Investing, you might not be familiar with our type of business. Did you know that you can get a mortgage loan from someone other than a bank? We are asset based lenders, meaning most of our underwriting criteria is determined by the project rather than the borrower. Our loans are typically easier to qualify for than a bank with a faster close. We have an A+ rating with the Better Business Bureau. We currently lend on non-owner occupied residential, single family, multi-family, commercial, vacant land and new construction. You name it and we'll take a look at it. Our clients use us for funding new construction, fix and flip projects and buy and hold investments. Our funds can be used for acquiring the property as well as rehabbing or construction. We can tell you more in future videos. Or feel free to check our website or reach out to us!

www.tabs-llc.com
303-429-1990
info@tabs-llc.com

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how to manage your new business' finances

Regardless the size, managing money correctly is exceptionally important for any business. The key to survive in a volatile economy and heavy competition is the proper financial management. When it comes to small businesses, however, it needs a great amount of caution in order to put the things right from the beginning. To run a business, you obviously need more than a good idea; proper financial structure is an essential aspect to generate good profit and stay credible. Here are some good tips to manage small business finance.

Educate Yourself

First thing you should consider when it comes to small business finance is getting sufficient knowledge about the essential aspect of finance. Particularly, at the initial stage, you should know how to read the financial statements at the least. Reading financial statements correctly will allow you to gain a strong insight about the sources of money and the changes occurred.

Cash flow statement, statement of the shareholder’s equity, balance sheet and the income statement are the essential details included in the financial statements. Each of these aspects represents different segment of information you should know and referring them with good awareness is essential for a good financial management.

Maintain Personal Finances Seperately

Personal finance should be strictly kept away from your business. One of the most effective ways to do so is getting a credit card or debit card for the business and put all the business related expenses on it. It is a great way of keeping tracks on the expenses incurred. However, you should be smart enough to make the payments on time; otherwise, penalty fees will incur more cost on your business budget. Also, having a separate bank account for your business is mandatory.

Reduce Costs

When it comes to a small scale business, it is quite important to know how to reduce costs. . Know about both fixed and variable costs. In general, fixed costs are mandatory costs that occur – no matter whether your company generates revenue or not. Purchasing of infrastructure, furniture, machinery, building rental, salaries etc. are fixed costs that can be hardly changeable even when you run at a lost.

Always Track Performance

Make sure that you maintain a strict watch on money; they way the money moves particularly when the large payments are involved. Don’t neglect the small, frequent costs as they accumulate into big sums over the time. Compare the financial statements with the past month and year to get a clear insight about the financial control. Such approach will help you to identify the potential areas you can rectify.

If you are not 100% sure about your knowledge about business finance, the best approach is to hire a professional. Although it might cost you some money to employ a professional business finance expert, at the end of the day, it will be a long-term investment considering the benefits associated with.  

getting started

 

New Year? Is It Time for You to Get Started in Real Estate Investing? 

Starting your own business is a fulfillment of a long-cherished dream. Making your own decisions, being your own boss and earning more money are the prime expectations of any entrepreneur. Apart from that, anyone can experience the sense of accomplishment and the pride which is hardly found when you work for someone else. Besides, in order to fulfill this dream, you need a systematical approach.

-          Build self confidence

The secret behind the strong foundation of success is nothing but the self confidence. Therefore, if you expect to achieve success for your business, you surely need to develop self confidence. For an entrepreneur, self-confidence is an exceptionally powerful tool. Businesses are always associated with calculated risks; willingness to take these risks increases with the self-confidence. Call it ‘going extra-mile’, ‘break new ground’ or ‘achieve success’, you cannot achieve none of them if you lack of confidence.

-          Make a business plan

In fact, making a plan for your business is the very first step you must make after deciding to start a business. This should include all the information including the type of the business, the operational structure, partners (if any), deadlines etc. The amount of money you expect to invest and the way you wish to raise the capital is an exceptionally important aspect. Make sure that the goals you set are practically achievable. Setting up unrealistic goals can discourage you very soon.

-          Be ready with knowledge and skills

It is always good to possess expertise knowledge in the field of business you are going to start. However, if you don’t have such expertise knowledge, you can consider hiring an expert/coach (either on permanent basis or freelance basis). Deal-making, marketing, SEO, web development etc. are the most common areas you would need the assistance of a professional.  

-         Start promoting

No matter how good your products or services, you cannot expect to succeed if you don’t promote it. What you spend on advertising and promoting is a compulsory investment for your business. Don't be shy about letting people know you would like to get started in Real Estate Investing. The more people who know about your business, the more people have potential to bring you an investment, valuable service or partnership.

Most business ideas remain unexecuted due to financial burdens; however, the use of hard money allows new investors to get started with less cash requirements than traditional financial institutions. Browse our previous blogs for how to evaluate properties. 



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2016 In Review

Wishing you and your family a blessed holiday season! Our borrowers have made 2016 a very exciting year with a wide variety of projects! We hope that 2017 brings ever more opportunity and prosperity to you and yours!

MANY BLESSINGS TO YOU AND YOURS!

An Introduction...

TABS, LLC is a locally owned and operating hard money lending company currently serving the State of Colorado. We are able to offer non-owner occupied real estate loans. We currently offer bridge, buy and hold, fix and flip, vacant land and new construction funding. Please give us a call or shoot us an email to discuss any upcoming Colorado projects!

key elements of construction contracts

you have the property, you have the loan, now you need to lock in the contractors. what now?

this is a construction project, right. things can go wrong, over budget, scope of work can be confused. get everything on paper, just in case there is a disagreement. here are some important points to have:

  1. basic info: 2 parties of the agreement with names addresses, job site address, start date, substantial completion date
  2. scope of work: the more detailed the better so that every one understands what is expected from the contractor
  3. material specifications: exactly what materials would be used if agreed to, for example, not just cabinets, but what company, brand, style, etc.
  4. cost: unit prices, materials, labor, management, anything that applies
  5. insurance: require that the contractor be insured and keep copies of their proof of insurance
  6. not to exceed: if a contractor would agree to a not to exceed contract (and not all will) overages not suggested by you would be the contractors responsibility
  7. payment schedule: so that everyone is clear when the contractor would be paid, it is necessary to have this on paper. if you pay by % completion or monthly, this should be a part of the agreement
  8. drawings and plans
  9. change orders: if anything needs to change, the process for doing so
  10. compliance: contractor will do all work in accordance with zoning, permits, inspections, local ordinances and codes
  11. clean up: contractor needs to keep site clean
  12. mechanics' liens: require that the contractor provide you with evidence that subcontractors have been paid for work completed. a lien release might be required by your lender in addition
  13. warranties: if any work is warrantied, what is and a time frame
  14. dispute resolution: how unresolved issues will be solved (arbitration, mediation, etc.)
  15. termination: right to terminate for a breach of contract for reasons such as poor workmanship, failure to meet the contract requirements or bankruptcy or insolvency

as always, make sure you find the right contractor for the job. vet them thoroughly!

this info was adapted from FLIP by Rick Villani and Clay Davis