Sidney Torres, a self-made millionaire in his own right, made a name for himself renovating houses in New Orleans. He now uses his money and expertise helping fellow property investors who are encountering challenges on their way to the top. His efforts have been showcased on CNBC's "The Deed."
A recent episode of the show showed, James Brook, an investor, falling in love with a house he'd been working on for about three years. The catch is that he finds himself without any funds to finish up the job. To finish up the entire renovation process, he'll need more money, but he's already half a million dollars in debt.
Brooks' situation conjures up one fundamental truth about real estate: renovations can easily turn into million-dollar money pits. Distractions like emotional attachment and delayed selling are seen as some contributing factors to the predicament
Speaking to Torres, Brooks shared that he's been paying property taxes, insurance, carrying builder's risk every annum. Despite his best efforts to get the job done, he shares that he's found it incredibly difficult to let go of the property. He proceeded to further share that he's become stuck with ideas about the property being his house. So much so that he is unable to countenance the very idea of finalizing the deal. He shares that he is fully aware that if the deal doesn't happen, then, he'll be destined to just let it sit.
Instead of letting it sit for a further three years, Torres decides to help Brooks bring his center-hall cottage back to life in a little over three months. Torres also takes the liberty to encourage Brooks to put the property back on the market.
Action
Torres believes that successful real estate flipper are those who don't allow emotions to come into the mix. His principle is that one should dedicate the best of themselves to the project without any attachment because the property is not able to reflect back the love
Finally, they manage to successfully list the property at $1.35 million. Notably, the property was acquired by Brooks for $230,000. Since then, Brooks has invested $240,000 to fix it up. The math shows that upon sale, Brooks would receive a lumpsum six-figure profit. Sufficient enough for him to attain financial freedom and allow him to buy and flip more properties.
According to Mindy Jensen, a community manager at BiggerPockets, it is difficult for one to find a house to flip that makes economic sense. This is because one is constantly competing with retail buyers who are simply buying up ugly houses due to the insufficiency of options. She mentions that her vast experience on the platform that acts as an informational and networking hub has enabled her to gain insights on the current state of real estate in the country.
Tips
Jensen is of the opinion that no one is really willing to hand out houses for free. Just in the same manner one can't expect to go to Home Depot and get supplies for free. In addition, she cautions those looking to invest a sizeable amount into the flipping enterprise to avoid using credit cards.
Brian Peavey's company, ProfitShare, is one of the few real estate establishments that have managed to come up with a formula for success. Peavey revealed that they make full utility of direct mail, social media sites, door hangers, real estate agents and a bunch of personal connection to successfully flip homes in Boise, Idaho. As an incentive to sellers, ProfitShare often makes a promise to add up additional payments once the property is sold.
In situations where ProfitShare's initial offer is declined in favor of a higher offer, Peavey shared that they don't lose hope. Rather, they put up a backup offer to enable them to seize up opportunities in case the first deal fails to pick momentum. He shares that this particular tactic has been quite effective on a number of occasions.