Flipping Houses, the real American dream
“Flipping homes”, what an exciting possibility! I think everyone who has seen at least 1 HGTV episode, has aspired to flip a home or two. While most would “love” to make a career out of it! The simplicity of it all, right? Making huge profits! Working via your own schedule! Designing something from scratch! Pure real estate bliss!
A dream come true!… for some.
Although the thought of “flipping homes” for a career sounds amazing. Flipping homes is actually quite complicated. And those designs, color schemes and fixture choices, actually take a hell of a lot of work. On TV, you’re mainly just introduced to 3 steps:
- Buying
- Fixing
- Selling
And while this is the bulk of what a flip project consists of, it’s the details connecting these 3 steps that mostly determine your success.
“Winning is great, but losing is also part of the game”- Jeremy Roberts
The same thing can also be said in flipping homes. I’ve hit it big on flips, and I’ve also lost big on flips, it’s just a part of the flipping game. Sometimes it feels as if you are going to win or lose, regardless of what you’re doing.
“Calculated risk, is better than no risk”- Jeremy Roberts
I’m a risk taker, I firmly believe you have to take risk to get ahead. With that said, I prefer my risk to be as calculated as possible. So, if I plan on Buying, Fixing and Selling real estate, here is what I’m evaluating, and in turn, decreasing my risk exposure:
- Funding
- Arguably the most important step in your Flipping process. Why? Because if you are not using 100% cash, funding for these type of projects is usually very expensive. For a flipping project, you can usually expect rates to be upwards of 10%
- Evaluating the Deal
- Evaluation is key, I see a lot of first timers assume that flipping a home is as simple as it sounds. Buy for 60k, put 20k worth of work into it and sell for 100k! 20k in profits, and on to the next one, right!? Wrong…doing a deal like this, with aforementioned funding, and you could be looking at only making about 5k in today’s investment market.
- Why? There is a multitude of costs that you have to apply to each deal:
- Realtors fees
- Title fees
- Taxes
- Misc.
- Cost of money (Interest, points, etc.)
- They eat away at the once promising 20k profit and they’re never really mentioned on HGTV and other shows.
- So, it’s important that you evaluate more than just the key Buying, Fixing and Selling numbers. Those smaller numbers in between are just as key!
- Exit Strategy
- Selling at the maximum price is always the goal, but sometimes it’s not always that simple and rarely does it happen. Leading up to the time that it takes you to finish and list your flip, there could be other properties that are similar, that have listed as well. The project could have taken longer than expected, so maybe you need to sell faster, due to paying the high interest rate for the money. Don’t fight against what the market is telling you. When the market speaks, you listen, simple as that! You may want X, but the market is telling you Y. Don’t be stubborn, go with Y and move on. Prepare yourself for different outcomes.
At the end of the day, your project is exactly that, it’s YOUR project. Success or failure is going to be determined by YOU. If you are new to flipping and trying to learn as much as possible. Seek the help of a professional, do not try this is alone. If you have questions, you can always reach me at, [email protected]