Flip or not?

[John Warren]

Hello everyone!

My wife and I are trying to decide if we want to flip our first house later this summer. As back ground, we just closed on our first quad last month. This building will be cash flowing between $600-800 this month (now that the inspection stuff is fixed). I am also finishing up classes to become a real estate agent, and I should be licensed in a couple of weeks. By July we will have around $20,000 to work, not including our reserves. This should allow us to buy a house in this area of the Chicago suburbs that needs some work.

I am fairly handy, and I can install cabinets, countertops, toilets, replace windows and doors, etc. I am not a very good plumber, and I know it is not always optimal to do everything yourself, but I am on Summer vacation (school teacher) until August! I could definitely do some of the work and contract out anything that is above my pay grade.

I guess my question is what are some of the things we should be thinking about before we flip a house? Do we start looking for lenders who specialize in flipping? Do we need to start an S corp first? What am I overlooking?

[Michael Woodward]

I agree with @Carrie Giordano.  You need as much education as possible BEFORE you jump in!  J's book is an excellent place to start because it condenses and focuses a lot of the most important information that's relevant to what you're doing.  It's taken me years to learn enough about the business in general and my local area to be confident that every project I buy will be a winner.  Even with years of experience though, it's possible to do something wrong that can blow the project and set you back financially for years.  

I look at this business a lot like learning to fly and airplane.  You know it can be done because you see people flying around all the time.  It looks easy but what you don't know is how long the pilot trained to become good enough to take off and land without hurting or killing themselves.  Doing a bad real estate flip obviously won't kill you but it can do enormous financial damage.  Sometimes that effects families and marriages so it's not to be taken lightly.

I'm not trying to scare you.  I just want to warn you that success in this business requires hard work and excellent decisions.  Read everything you can.  Get a local mentor if you can.  Do it right and you'll succeed.  Good luck!