Trying To Save Money Could Cost You More
By JD Esajian on October 16, 2013
There are a lot of new investors who enter the industry on a shoestring budget. They may have enough money for a deal, but they know if they don’t watch every dime they can get in over their heads. Instead of looking at the big picture and making decisions based on what makes the most sense, they get caught trying to cut corners. If you try to do work that you are not qualified to do or look for an unrealistic sale, you will end up costing yourself greatly.
For the most part, new investors will try to save money on small repair projects. However, your experience should dictate whether or not you work on the project personally. Any work you do to a rental house, or a house you are going to flip, needs to be quality. Accordingly, for a job to be done correctly, money must be spent. Taking the time to do something correctly is well worth it. The last thing you want is for poor work to drive away any prospective tenants or buyers. Any work deemed poor will only help to eat away at your bottom line.
Simple projects, like painting and small contractor work, could possibly be considered. However, once you consider demolishing walls, a professional must take part. Just because you saw it done on a reality TV show does not make you a professional. There are places where you could trim your budget, but home repair should not be one of them.
If you are chasing money, you can find yourself trying to get every dollar out of your rental or sales price. This is the worst way to go about it. There are times where trying to get every dollar is fine, but if you price your property out of the market you will actually do much more harm than good. Once a property is listed too high, it will sit on the internet or the MLS, loosing appeal every day that goes by. Instead of listing it at a fair market price and trying to create a bidding war, you will be forced to lower the price after you have lost a few months. Buyers and renters will notice that the property has been on the market during this time and will sense your desperation, causing you to lower your price. If you had just started out at fair market value, you would have gotten a fair price.
Every day you lose costs you money and time. To make money you have to spend it. There are some deals where you have to know your profit limitations and accept it and move on. Once you start trying to get greedy, you can end up losing money. A small profit is always better than a small loss.