First Time Investor - Start with a Flip?

Question

I am fairly new to BP and am very new to the world of real estate investing. I live in Charlotte, NC where I would like to begin my investing and my path towards financial freedom. A few quick details:

-I work a salaried job Mon-Fri typically 7am - 5pm.

-I have a wife and 5 1/2 month old son.

With that being said, I have been struggling to get started. On the flip side, I would like to point out a few positives :

-I have a chunk of money set aside I feel comfortable with investing on my first property ($60-80k).

-I am a very driven individual and am very sold on the idea of utilizing real estate investing to obtain financial freedom.

-I am very open minded and welcome all suggestions.

I have a friend who is a realtor in the Charlotte and outlying market. He is also interested in investing in flips (for him to gain a cash pool) and then looking into rentals down the road. We have talked about a LLC, but have not acted on it yet.

Any advice as to where to start would be greatly appreciated. I’m not asking for a hand out or a specific property I should buy, just a push in the right direction would be awesome!

Thank you for your time!

Daniel C.

Rob Beeman · Answer

@Daniel Curtis Rule of thumb is, create your comfort zone(s) and work within it (them). Comfort zone for location (how far from home), for time (How much time per week to devote & when - evenings, weekends, both?). Comfort zone on funds to invest (with the current capital that you mentioned, chances are you will be using a lender's funds along with yours as leverage). Comfort zone on property condition: turnkey rental (no work needed), cosmetic improvements (light rehab), standard improvements (new kitchen, bath(s), mechanicals, etc.) or heavy improvements (major rehab or gut rehab).Even if you are planning on starting with rentals, you might still encounter dealing with contractors if you choose to buy, improve and hold for cash flow, as this creates equity, and might allow for you to tie up less of your cash if able to refinance and recover cash during the refinancing process.Don't be afraid of what you haven't experienced. Try to be wise where possible, such as when working with contractors, what I have done is this: They supply the labor, and I supply the supplies. Here is how: They choose the Home Depot or Lowes that is convenient to them, they choose the day and time that works best with their schedule to grab the supplies. They text me saying that they are on their way to the store to get supplies. They shop (whether getting the supplies then, or arranging to pick them up at another time), and when they are ready to check out - they go to the contractors desk (or customer service). The cashier rings them out and then calls me for credit card payment. I supply the card info, the store emails me the receipt. I review the receipt to confirm that proper supplies were purchased (no tools) and keep the receipt for a record. In doing it this way I maintain control of the project, do not pay a mark up for supplies (nor pay for supplies that will be used on job sites that aren't mine), and only pay the contractor(s) for labor. I NEVER PRE-PAY FOR LABOR! So, it greatly reduces the chances that I will have a contractor receiving money (what others have referred to as stealing money), for services not rendered, as I pay for labor completed, as performed.If you want to be a thrifty shopper, technology makes it possible for you to know the price of things online (Home Depot, Lowes, etc. have prices online for everything). Its not difficult to figure out what the supplies are roughly going to cost, and the sku numbers for every item. You might encounter some push back from contractor on using this method (I have), but my thoughts on that are, if they can't work with that system, then they aren't the contractor for me. What do successful franchisors do with franchisees that buck the system? They replace them with those that embrace the system and make money. In other words - choose the people (companies) that you build as your "team" wisely, and make certain that your personality and goals fall inline with theirs.As for time, you will probably devote as much, or more, time in locating the right property that makes sense, as you will improving it or collecting rents from it. Finding the best deals are time consuming, especially around a FT job. Assemble a good team (realtors, wholesalers, lenders, contractors, etc.), do your homework in advance and you will be amazed how much can get accomplished with even part time commitment. The majority of investors that I lend to are part time, whether they flip or hold, some doing as many as double digit property purchases (or flips) a year. Start with one, iron out the wrinkles and game plan from there. Best of luck.

Nicholas DiPasquale · Answer

Hi @Daniel Curtis and welcome to BP! I, like you, am also jumping in and setting up my strategy for investing. I have spent the past several months with reading, podcasts, webinars, meetups, etc. and what it comes down to are your goals, strengths, time availability and personality. Flipping & wholesaling are more active forms of investment, where buy & hold are more passive (depending on your property management approach). Best place to start is with your goals... why do you want to invest? where do you see yourself in 5 years? And then work yourself backward from there. You might find an approach that marries it all together. You are certainly in the right place... lots of great resources here to point you in the right direction.Good luck!

Rylan Rock · Answer

The hardest part is getting started and buying that first house. If you have a friend who is a realtor then you're off to a good start. Finding a good realtor, contractor and obtaining the funds are some of the biggest hurdles you will face in flipping. You already have 2/3 taken care of.Take a look at J Scotts book on flipping houses if you haven't already. This will help you prevent some mistakes new flippers commonly make. Knowledge in the industry will bring you the confidence to actually buy that first house and start flipping!Good luck!

Daniel Curtis · Answer

@Ola Dantis Thank you for taking the time to read my post and the recommendation. Numerous people have posted recommending a rental(s) over a flip. I think that’s what I’ll go with. Works better time wise for me and I feel like there’s less on the line and that can go wrong.

Brent Paul · Answer

A flip can be very overwhelming for your first deal. Make sure you know what you are getting yourself into. Expect costs to go over 10 to 15%. I have heard way too many stories of contractors taking off with their money. Doing a flip while having a full time job and a family can be pretty stressful. You need to get solid comps and purchase for well below ARV or you will lose your shirt.Have you thought about rentals? That will be more passive and consistent monthly income. You can make something with just about anything. It's all personal preference and where you see yourself in the next 10 years.

Chris T. · Answer

@Daniel Curtis - Welcome to BP!As others have stated, flips can be very time consuming and things will not go exactly according to plan. Being in a similar situation as yourself (full time job, family, etc.) I have steered away from flips, but I have met people busier than me that have made it work. I encourage you to meet with others here in the Charlotte area that have already or are currently flipping and get more details from them.I host a monthly meetup of Charlotte area investors (1st Tuesday of each month @ Resident Culture Brewery), but there are lots of different meetups available. Check out the "Events" section under "Network" here on BiggerPockets to get started. Local meetups are a great way to network and talk with others that are active in the area.Best of Luck!

Ola Dantis · Answer

@Daniel Curtis Personally, I would advise your first deal to be a flip because there are so many variables and since it is your first one you are even more susceptible to errors. Now, one way to mitigate that is to partner with a solid flipper in your area, if you are so interested in flips. I thought I love flipping because I watched too much HGTV until I was actively managing a flip... 😬😬😬 Why not go Buy and Hold with your seed capital? This way, you can still manage it while you keep your day job and keep your time to spend with your family.

Kathy Calderini · Answer

@Daniel Curtis I would suggest you find a contractor you can trust and build a relationship with for the long term. Your Realtor friend may be able to introduce you to a few. This is the key to success! The contractor should walk each property with you to ensure the scope of work is complete so you have no surprises once the project gets started. I would also suggest you find a project/property that needs some curb appeal and cosmetic work with great bones for your first deal! Limit the risk of “unknown” risks. Hope it helps!

Daniel Curtis · Answer

@Kathy Calderini everything helps! Thank you for taking the time to read my post and respond. It means a lot to me. I think that’s great advice to go for something that needs a little love (paint and landscaping) versus an entire overhaul.

Jerryll Noorden · Answer

Keep this in mind,I am not saying you shouldn't. I will tell you MY experience with my first flip.I had everything in place. Had everything figured out, I had all my T's crossed and all the frogs in my soup (I made that up, thought it sounded good here).My contractor stole money, left me mid rehab, and other poop I shan't mention.My point simply is this. A flip doesn't just depend on you to be successful. Other people (especially contractors), make it hell!But yes, you can absolutely do it with the right crew.