There are many ways to profit from investing in real estate, and long-term strategies such as leveraging cash flow from multi-family residences have their success stories. However, for the small investor willing to put sweat equity into their personal fortune, a fix and flip approach in real estate investing can be the shortest path to financial freedom.
Set Your Financial Freedom Goals
Financial freedom, in this context means the ability to work exclusively in this segment of real estate as much or as little as the investor desires. It means the investor has generated a sufficient amount of capital that they could retire comfortably. Depending on the age of the fix and flip investor and their definition of “comfortably” this means that this approach to real estate can be expected to generate a significant amount of capital.
Setting this as a goal is ambitious, and the first step is to complete enough transactions that have generated enough profit that the investor can devote themselves to the strategy as a full time occupation. In fact, the investor who can quit their “day job” and work only on fixing and flipping residential real estate properties has made a significant step toward financial freedom. They have also done two other very important things.
Two Key Attributes Of Every Fix and Flip Investor
First, they have persevered. Every fix and flip investor has made some major mistakes, and probably has lost money on a transaction. The successful investors who reach financial freedom have learned from those mistakes. They no longer make key assumptions about a property, but do the “home work” on each and every transaction before buying the property.
Second, they have built a strong network of other professionals who can be brought to the table when necessary to complete a project. This includes real estate lawyers, contractors, agents and bankers. Not all will be involved with every fix and flip transaction, but all are familiar with the investor and are willing to step in when necessary because of the value they put on the relationship.
Understand The Importance Of Gut Instincts
Science has recently verified what every fix and flip investor knows. The gut is a second brain. The ability to trust gut instinct and get involved in, or walk away from, a fix and flip opportunity is as necessary for financial freedom as the ability to calculate the compound growth rate on an individual transaction. Often times this is lesson taught in the negative, but that does not diminish its value.
A developed gut instinct will also tell the fix and flip investor when it is time to step up their game and get involved in larger deals. This may include houses that are complete tear-downs rather than remodeling projects. It may mean getting involved with another deal at the same time. It may mean employing more leverage than previous transactions required. The road to financial freedom is uphill, and the real estate investor who crosses the finish line is the one who is always willing to step up their game.