Is Flipping Houses a Profession for You?
By: Roxanne Hale
Tags: Home Improvement, Startup, Money, Business, Home Design Ideas

Is Flipping Houses a Profession for You?

The Real Thing isn’t Like an HGTV Episode

Photo by Unsplash

In my real estate profession, I hear from people who express a deep desire to chuck their day job and become full-time house flippers or renovators. All the HGTV home shows reinforce the idea that renovating is a fun adventure.

…And sometimes it is.

The trouble is that there are myths out there that house flippers make crazy silly money renovating houses. Like the one guy you hear about that lucked out and made a tiny fortune buying bitcoins the first time around and brags about how it easy it is. People hear these stories, run out and try it, only to fail.

You can make money flipping houses, but it probably won’t be accidently and certainly won’t be simple. It takes practical thinking, hard work, loads of common sense, and a little money. If you are short on any of these, stop reading and get back to your day job.

In my time renovating, building, and helping others do the same, I’ve spotted a few mindsets that improve a person’s odds of succeeding. If you’ve been dreaming of jumping into the investment side of real estate, keep reading and see if it might be for you.

Do you have real estate and construction knowledge or an eye for design?

When wading into the real estate market without prior experience, you’ll need a few experts to guide you. Three experts to be exact — a real estate professional, an experienced residential contractor, and a designer — all on speed dial.

If you’ve never evaluated real estate to buy, find a very experienced and candid realtor to guide you. The good news is that it will be easier to find a qualified realtor than it will be to find a contractor. These guys are notoriously busy all over the country. Do your research and find a few contractors whose portfolio match your project goals.

For a flip or renovation to work well you’ll need to make smart design choices or work with a designer who can help you. For the house to do well on the market, it should be designed and decorated to fit in the market you are selling. Many first-time flippers spend too much money on finishes — overdoing it, while others go way too cheap and cut too many corners.

Study your market. Which homes sell quickly, and why? What types of finishes do those homes have? Those homes hold your best clues as to what the market expects from your flip.

Do you have a day job?

If you identified a suitable project today, it would still take you six months to a year or longer before you can expect to have it on the market or make a profit from it.

During this time, you will still need an income. Keep your day job until you have completed the renovation process successfully at least a couple of times.

Are you willing to be realistic about how much you will make?

There are many unrealistic stories out there encouraging would-be flippers with tales of how much money they might make. Your first-time flipping may result in a tidy profit, or you might just break even. Hopefully, you won’t lose money-but you might.

Set a modest goal. Speaking from experience, if you calculate your budget and profit and it looks like you’ll make a fortune — you have either overestimated how much a buyer might pay for the house once it’s complete or miscalculated how much the work will cost.

Are you able to take risks without having all the details up-front?

There are risks involved in buying and selling real estate, especially when investing. You won’t be able to manage your risk down to zero.

It’s likely, even with careful due diligence, you won’t have all the information upfront before you make the decision to buy the property. Even after you buy one, there are several unforeseen circumstances you could face. You may find additional surprise repairs in the home that you did not anticipate. Sometimes theft and damage occur while the house is under construction. The market could change for the worse while completing the work.

You’ll need internal fortitude to make it through the entire process.

What is the best way to get started?

If you are seriously considering getting into the investment side of real estate, the number one thing you can do right now is to begin looking at property. It’s common for investors to look at hundreds of houses before they buy one that has all the right criteria. Start your search on the internet. Once you narrow a few contenders down, set up showings for those properties with an experienced real estate agent.

The process of walking houses and evaluating advantages and disadvantages of each is a great way to educate yourself. By looking at lots of properties, you learn about pricing in your market, how quickly homes sell, and what types of qualities you want in your first project.

Two final tips once you find a property:

1. Don’t get overly excited during negotiations because you erode your negotiating position. You may have to walk away from the property if the price isn’t right. If you overpay on the initial purchase, you won’t make it up in the renovation.

2. Don’t fall in love with the house while you are renovating it. It’s only an investment!

Renovating and flipping houses is a fun and exciting way to make a living. You can also lose big. Align yourself with smart professionals early on while you are learning the ropes. Be realistic in your goals. Tour lots of houses before you finally buy one.

If you can do these things, flipping might just be for you!