Today we are going to discuss why delays cause more stress and less profits. As a real estate investor, your profits as well as peace of mind depend on one thing: speed. The faster you complete a project, the more money you make, and the less stress you endure. Let’s dive into how delays can derail your plans and what you can do to avoid them.
The Common Mistake: Not Being Money Ready
One of the biggest mistakes real estate investors make is starting a project without being fully money ready. Many underestimate the costs involved in finishing a property, including:
- Purchase price
- Rehab expenses
- Carrying costs (insurance, taxes, HOA fees, etc.)
- Unexpected expenses
The Fix-and-Flip Process
When flipping a property, timing is critical. Therefore, hitting the right market season, like spring or late summer, can maximize your profits. For example, missing the window to sell before Thanksgiving could mean holding the property through slower months, like December and January, where carrying costs pile up and profits shrink.
Example: The Tale of Two Investors
Investor 1: Money Ready
- ARV: $400,000
- Expected Profit: $60,000 (15%)
- Timeline: 5 months
This investor had a well-prepared budget with extra funds for unexpected issues, like $7,500 in unforeseen repairs. They handled delays without disrupting the contractor schedule. As a result, they finished early, saving money on carrying costs as well as closing with a $55,000 profit.
Investor 2: Not Money Ready
- ARV: $400,000
- Expected Profit: $60,000 (15%)
- Timeline: 10 months
This investor wasn’t prepared for unexpected costs and had to scramble to find $7,500 for repairs. The delay caused contractors to take other jobs, pushing the schedule back by months. As time dragged on:
- They paid an additional $3,000 per month in taxes, insurance, as well as interest.
- They had to lower the property price by 5% ($20,000).
- Their lender charged a $5,000 extension fee.
In the end, profits shrank to $15,000, and stress levels skyrocketed.
Why Speed Matters
Delays snowball into higher costs and lost profits. Here’s how:
- Added Carrying Costs: Every extra month means more payments for taxes, insurance, and interest.
- Price Drops: Holding the property too long can force you to lower the price to attract buyers.
- Stress and Missed Opportunities: While you’re stuck on one project, others are moving ahead with the next profitable deal.
How to Stay On Track
To avoid delays and protect your profits, always have 20-40% of your total budget in available funds. This could include:
- Personal savings
- Lines of credit
- Credit cards
- Financial backers
When unexpected expenses arise, having these funds ready ensures your project stays on schedule.
Real Estate Investing Is About Speed
In conclusion, speed is the name of the game in real estate. Fast closings not only help you secure great deals, but quick project completion can also maximizes your profits. While delays can snowball, preparation keeps you in control.
If you need help setting up your financial plan or finding the right funds, reach out. We’re here to help you succeed, make more money, and more importantly enjoy the real estate investing journey.
Watch our most recent video to find out more about: Why Delays Cause More Stress and Less Profits