Full-time flipping for a day job?

Question

First time poster— forgive me for the vague question, but I’m trying to organize my thoughts and plans!

I’m currently selling my home at a fair profit ($250K with a 1031 exchange) and using the proceeds to go into a real estate business with my mother. She has a great W2 job and a home of her own. I also have a small amount of cash saved up ($20K).
We’d like to put most of the funds from the sale of my house into rent and hold real estate investments to build wealth over time.

BUT… I closed a business when I sold my home. I acknowledge that I still need a day job. But I struggle with the routine of most jobs. I would LOVE to find a way to do real estate full time as quickly as possible. Is it realistic to start into our first flip while simultaneously beginning our rental portfolio? And, if I work full time on the flip, can flipping be my full-time job? I’d be happy to live in the flips (or in my RV on site) during each rehab. I’d be willing to do flips anywhere in the USA.

… that’s what I’d really love to do— invest in rentals and do flips as my full-time job.  Any insights to talk me into or out of this plan would be great!

Dan White · Answer

I took the leap with my partner in Jan 2020 to go full time in Flipping. Best thing I ever did. We both left 6 figure cushy jobs. We loved the freedom that this brought.

It was pre COVID so we dealt with some ups and downs but it has been amazing. It isn't always easy...you have to be organized, market yourself, and run a real business. I wish I would have done it sooner.

Kevin Ivey · Answer

Yes you can but as is pointed out it is a hustle to find the right projects, build a network of contractors, realtors, title etc... so hard to do it nomad style.  It will be your job so as you know it means self employment taxes on the income etc... just like any active business and job.

You can't use a 1031 exchange for flipping as it is an active business not a long term investment.

I work actively flippng houses the last two+ years it's my job, when I have a great project, I use that extra capital to help me invest in my rental portfolio, just like I did with bonuses from my old W2 job.  I do appreciate the flexibility and determining for my self what my priorities are.

William Harvey · Answer

@Joe Pascale Yes, this is completely possible and really has been exactly what I/we have been doing. I've used the cash generated by flipping to pay living expenses, and also to fund investments in rentals, passive multifamily investments, etc. From personal experience I think this strategy is great. I think of flipping as my "day-job" (that is way better than an actual 9-5 day job) that gives me the cash to fund other ventures that are more long-term.

Hope this helps!

Will Barnard · Answer

correct me if I’m wrong but I understand that intent has a lot to do with the 1031 qualification as well. The 365 day timeline is certainly there but if your intent is to flip and the pattern is a flip, couldn’t the 1031 be denied?To the original question, sure you can flip as your day job but know that your average flip will take at least 4-6 months from close of escrow to close of escrow and in between that time, you have NO paycheck.

Living in flips slows down the flip and is not the healthiest way to live. Slowing down your flips will increase the hold period and thus, increase the holding costs cutting into profits. “When you flip, time is your enemy.” - Will Barnard

Buying rentals and flipping at the same time is one great strategy in my opinion because you can toss your flip profits into additional buy and holds or use less leverage to increase net profits on 2nd flip and so on.

That said, it is no easy task and we have entered an entirely different real estate market now. Enter flips at your own risk, be advised that downward pressure on values is almost a certainty in many areas, not all. Real estate is local so pay attention to your local market data and not national data.

Dave Foster · Answer

@Joe Pascale, slow down the flipping time and you can still enjoy both the adrenaline rush of fixing and flipping and get the tax deferral of the 1031 exchange.  Instead of fixing and flipping.  You fix and rent.  Refinance if you want to get your next property under way.  And then sell after you've owned that property for a year or so.

By doing this you still get to buy and value add.  You get at least as change from ordinary income tax to capital gains.  You open up the possibility of a 1031 exchange.  You are only slowed the first few months as you can always use a cash. out to buy your next property.  Win win win win situation.

I have several clients doing 20-30 exchanges a year - all on properties they've owned for more than a year so they can 1031.

Bruce Woodruff · Answer

How are you going to live while you do these flips? Your $20k in savings will go away fast with the repairs you'll be doing....

Don't forget you've got holding costs on the flip houses every month.....

Joe Pascale · Answer

All fair points!  Thanks for the feedback.  I’m still exploring some day job options that might give me the most schedule flexibility for pouring time into the real estate business.

The point about the 1031 is a good one— so, I’ll keep in mind that any flip we do get into has to be funded outside of that original seed money from the sale of my home.

I’d still like to work towards the same goal… but I’ll be cautious about my steps along the way.

Alexander Szikla · Answer

So it isn't advisable to start flipping in this market cycle as interest rates begin rising.

Also, carrying a day job gives you access to much more advantageous financing.

Not to mention, flipping isn't tax effective and has high transaction costs (i.e. attorneys, transfer taxes, commissions, etc.)

Just my food for thought.

Full-time flipping for a day job?

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