One of the questions I get asked a lot here on my blog and on Instagram is if I have any tips or suggestions for aspiring house flippers, and while I certainly don't believe I have all or any of the answers, we have been doing this for about 7 years so I do feel like we have some insight to share with people wanting to start flipping homes for a living or even as a hobby.
I'll give you a quick little back story about how we accidentally started flipping houses. The goal was ideally to just buy fixer uppers, fix them and rent them out so we could bring in a decent income every month. We were young when we started, Nick was just 20 years old when we bought our first rental property, it was always something he had talked about, but I never really put much thought into actually doing it. Nick is from the city, Baltimore City to be exact, and yes, it's pretty much just as bad as how it's portrayed on TV. However, the reason we decided to start here is because you could buy homes ridiculously cheap.
Not a lot of people want to deal with the dangers of being in the city though, I guess that's one of the reasons homes are so cheap. Since Nick grew up in the area, he was familiar with it and it didn't intimidate him, this worked in our favor, We bought our first fixer upper row home with our tax money one year, we paid $11,000 for the house and it needed a lot of work, but nothing that Nick couldn't do himself. A self taught plumber, electrician, framer, roofer, pretty much everything, he was able to do all of the work himself and when all was said and done we put about $8,000 into the house before it was ready for rent. We went on like that for a few years, renting. Each time buying a better house in a better area, eventually moving out to the county and making $80k off of one flip which we then in turn used to buy the home we live in now. (More on that another time..) Renting was stressful, I hated it. I hated the phone calls, I hated dealing with the rent, I just didn't like any of it. So we decided to sell everything and just start flipping for a living.
These days our houses are in much better areas, and selling for much more money and we're very thankful of the path we took to get here. We never used a single bank or got a single loan along the way. I think in the end that has worked out tremendously in our favor. Since we're not paying banks back at super high interest rates, we're able to maximize profits.
So I know you're dying for me to get to the point and share some of my "tips" and advice for people wanting to start flipping homes, I'm going to try my best to address some things that I think are most important, or at least things that have been most important in our journey.
1. Start Small-
Unless you have a huge amount of money in your savings account, don't go out and spend $120k on your first flip house and then put another $50-70k into it. Just don't do it. Lots of times, you'll lose money on your first flip. This is because you're new, and learning. Things go wrong that you don't put into your budget, I remember one time we bought a house "as-is" and ended up having to rip out and redo the entire foundation which cut about $10,000 into our already low profit margin. During most flips, as with home renovations you're going to run into a problem. Big or Small. So that's why I suggest not to get a lot of money tied up into your first flip house.
You'll soon learn what works and what doesn't for your flipping style.
2. Befriend a REALTOR-
We've been with the same exact realtor for almost 10 years, he's become a friend to us. He even attended our wedding. We've made him a lot of money and vice versa. Why do I say you should befriend a Realtor? Because they are going to find the deals for you. Want to know a secret? 99% of Realtors also flip homes for a living. So before a good deal on a flip house even hits the public market, you have thousands of realtors jumping on that home before you're even able to get your hands on it. We've seen this happen so many times. "An Inside Job" our realtor tells us. Since we're friends with our realtor (who yes! does also flip houses for a living!) he gives us an up on a good deal before it even hits the market. It's so important to have a good realtor when it comes to flipping.
3. Learn The Trades-
I strongly believe the reason we're able to be so successful flipping homes is because Nick literally does all of the work, we do have a small crew of guys that work with us, but Nick is the master electrician, the plumber, the framer, the roofer and pretty much everything else. We probably save at least $30-$50k per flip just doing the major cost items ourselves. While I do realize people are flipping homes that don't know how to do these things, I believe it certainly helps when you can or do.
4.Will This Become Your Job?
For us, flipping homes started out as a secondary income. Nick also started a business around the time we bought our first flip doing contractor and remodeling work. He would literally work all day and night, during the day on jobs, and at night on our flips. It was very stressful at times and hard on relationships and family life. Flipping is not as easy as they make it appear on TV, there is way more that goes into it then that. If you're going to be working a day job, you need to figure out when you're going to have time to work on a flip house. It's going to require lots of time, and hard work. Be sure you're prepared, physically and mentally for it.
5. Set Money Aside For "Surprises"-
Like ripping down an entire level of a house because yes, that's happened.
I talked a little about this before but I can't stress it enough, make sure you save money and figure about $10k extra into your budget for surprises. Are you going to be paying a monthly payment to a bank every month for a loan? Figure in a couple of extra months worth of payments just in case. Most of the times, flips, especially first ones, don't go according to schedule. We always give ourselves at least an extra two months worth of time to flip a house, because you just never know what can pop up or happen.
6. Where are you getting the money to buy it?
I talked before about how we don't use banks, but we have used a hard money lender in the past. This worked better for us because it was easier to get the money. Banks don't want to lend to aspiring house flippers because there is so much of a risk (At least in our experience.) So we've used a hard money lender before. But this can be super risky and even more trick then a bank loan if you aren't familiar with them. Basically our hard money guy funds the whole project, and then he gets half the profit on our house. Which evens out to be less then what a bank would get in the end, so it works for us. The trick is that you pay the hard money lender every month in interest alone, so essentially you are giving your money away. But it's still less risky then us funding a whole project and then something happens and we have to take a full loss, in the end we would just lose the house and all monies paid instead of losing everything and then having to pay a bank loan back regardless. I really suggest you look long and hard and study hard money lenders if that is the path you want to take. I don't like to think we're experts but we've paid off several homes this way and it seems to be working well for us.
SHEW! That was a lot of information to take in wasn't it? And now I feel like I just typed that and nobody is going to read my small book.. At least now I can just direct people to this post when they ask, right? Much easier then explaining it 765 times.
I'm not an expert, and neither is my husband so please, don't take this information as expert advice. But we have been doing it successfully for 7 years and have been able to make a living so I feel like we do for sure have insight. That being said, I hope this information helps some of you looking to flip houses! It really is a lot of fun and a "dream job" to many!
Did I answer all of your questions? If not let's chat on Instagram or Facebook! Or you can always leave a comment below, I always respond or try to at least! Love you guys!
Hope you guys have a great day! Happy Friday Eve!