Advice for New Flipper

Rehabbing & House Flipping
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Advice for New Flipper

Tim Porsche
Investor · Denver, PA · Member since 2015 · 193 posts · 55 votes

Hi All,

I have been thinking about getting into the house flipping business, but admit I am a complete newbie and really know precious little at this time. I've ordered the book from BiggerPockets on house flipping from Amazon, and plan to read over it and learn as much as I can before deciding if this is something I want to pursue or not. Anyway, I have a few questions for those of you who have done house flips in the past, and would super appreciate any responses\information you could give to help me out.

1. For my first house flip I would probably start small, try to get something under $100,000. My question is, would I need (or is it advisable) to have money of my own to put down on the house, or could everything be done through loans? If I have to put down 3-4% that would not be an issue, I'm just trying to get an idea of how much cash money is required to do a flip like this.

2. If you do your homework, research, and preparation properly, in general, what percentage of the time do you a. Make enough money to make it worth your time and effort, b. Make enough money to roughly break even, c. Lose money, either a lot or a little? I know there are always risks involved, and I'm okay with that, I just want to make sure that they are smart risks. I also do own a rental property already, so if I would have a flip that goes bust, you could always rent it out and recoup most of your money over the long term right?

3. Is doing a flip something that can be done part-time on the side, if you already have a full-time job? Or is it something you need to dedicate yourself to full-time?

4. I know this must vary widely, but on average, how much time per week would you need to do a house flip? Assuming you have contractors do most of the work.

5. Admittedly, I'm not the handiest man in the world... When house flipping, do you do a significant part of the rehab work, or do you mostly pay contractors to do the work? I could do general labor things like painting for example, but when it comes to electrical, plumbing, etc...not so much.

6. Are there any particular bits of advice that you would give to someone new to house flipping, or thinking about getting into it? Anything that you wish someone would have told you before you started house flipping?

Any advice is hugely appreciated, thanks in advance for taking the time to read this and for your responses.

-Tim

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Christopher Brainard
Rental Property Investor · Rockwall, TX · Member since 2015 · 891 posts · 701 votes
11y

Hi @Tim Porsche and welcome to BP.

1) It is possible, but it will cost you. There are basically three ways to go - The first is hard money. It is expensive, but they look at the deal and if the numbers work, they will lend you money. Your ability to put money in or required credit will vary source by source. The second option is a FHA 203B loan. The down payment would be low, but from what associates of mine have told me, it can also be a pain to deal with the inspections and withdraws. The last would be to find a partner with capital. This would be the best option if you're just starting out, provided you can bring enough to the table to attract someone with experience to help guide you through the first few flips.

2) I'm not sure I really understand this question. Option A is the only acceptable scenario. Option B and C lead to certain doom for an investor. Buy at the right price, don't just buy something because you want to be an investor.

3) Depends - the six flips I've done have all been while I occupied the property, so I was in no rush to get done. There are tax advantages to living in the flip, as you can get a tax credit if you live there for 2 of the past 5 years. If you were not living in the property, time is of the essence, as the interest payments will kill you.

4) If you have contractors do the work, you just need to oversee things, therefore, you wouldn't need a ton of time. The down side is, you won't make nearly as much money. Contractors are expensive, even for the little things, and you can't trust them 100% to do the job right and on time. Finding good contractors is a challenge. 

5) You should do as much work as you possibly can if you want to maximize money. If you have tons of money, have contractors do the work, as your most valuable commodity is time.  Depends on your situation.

6) Education is key - Read and learn as much as you can. Learn as much as you can about DIY through you tube. even if you hire contractors, you need to know what is going on to talk intelligently about the situation and make sure you aren't getting ripped off. Flipping properties can be a great source of income but it is also high risk, especially if you don't know what you are doing. 

-Christopher

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  • Christopher Brainard
    Rental Property Investor · Rockwall, TX · Member since 2015 · 891 posts · 701 votes
    11y

    Hi @Tim Porsche and welcome to BP.

    1) It is possible, but it will cost you. There are basically three ways to go - The first is hard money. It is expensive, but they look at the deal and if the numbers work, they will lend you money. Your ability to put money in or required credit will vary source by source. The second option is a FHA 203B loan. The down payment would be low, but from what associates of mine have told me, it can also be a pain to deal with the inspections and withdraws. The last would be to find a partner with capital. This would be the best option if you're just starting out, provided you can bring enough to the table to attract someone with experience to help guide you through the first few flips.

    2) I'm not sure I really understand this question. Option A is the only acceptable scenario. Option B and C lead to certain doom for an investor. Buy at the right price, don't just buy something because you want to be an investor.

    3) Depends - the six flips I've done have all been while I occupied the property, so I was in no rush to get done. There are tax advantages to living in the flip, as you can get a tax credit if you live there for 2 of the past 5 years. If you were not living in the property, time is of the essence, as the interest payments will kill you.

    4) If you have contractors do the work, you just need to oversee things, therefore, you wouldn't need a ton of time. The down side is, you won't make nearly as much money. Contractors are expensive, even for the little things, and you can't trust them 100% to do the job right and on time. Finding good contractors is a challenge. 

    5) You should do as much work as you possibly can if you want to maximize money. If you have tons of money, have contractors do the work, as your most valuable commodity is time.  Depends on your situation.

    6) Education is key - Read and learn as much as you can. Learn as much as you can about DIY through you tube. even if you hire contractors, you need to know what is going on to talk intelligently about the situation and make sure you aren't getting ripped off. Flipping properties can be a great source of income but it is also high risk, especially if you don't know what you are doing. 

    -Christopher

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  • Mark Nolan
    Professional · Carlsbad, CA · Member since 2012 · 12k+ posts · 1k+ votes
    11y

    @Tim Porsche

    Welcome to Bigger Pockets. BP is full of resources. You will find resources here from blogs to pod casts and forums. You can also send messages to members. This is one of my favorite features of Bigger Pockets especially for asking specific questions.

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  • Ben Rutkevitz
    Lender · New York City, NY · Member since 2015 · 104 posts · 26 votes
    11y

    I agree with all of @Christopher Brainard's answers. I am currently doing my first flip in CT.

    1. You can get a conventional or FHA loan but if you have to move quick to secure the property this could be an issue. Hard money or private investor is an option.

    2. I intend to make money on my first flip, but would have been happy to break even because what I really wanted with this experience was to learn the process.

    3. I have a full time job and am thankful that my business partner has more free time to be at the property. I believe it is important to be at the house overseeing the contractors and making sure they stay on schedule.

    4. I would estimate about 5 hours per week if you have contractors doing the majority of the work.

    5. My advice would be to try and team up with other investors to diversify your risk and gain experience through the partnership.

    If you have any opportunities you would like me to look at, I would be happy to and let you know my thoughts.

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  • Tim Porsche
    OP
    Investor · Denver, PA · Member since 2015 · 193 posts · 55 votes
    11y

    Thanks for the replies Ben and Christopher, lots of great information there!

    I'll try to clarify question #2 a little better for your Chris. What I meant was, basically how often do you actually end up making enough money where it is worth your effort doing a flip? I know that obviously the intention is to make money every time, but of course unforeseen things can always come up (repairs ended up being more costly than you had calculated, you have trouble selling it for a profitable price for whatever reason, etc). I guess I was just wondering how often you have run into serious unforeseen issues that make turning a profit hard or impossible?

    I'm still waiting for the the book to arrive that I ordered and plan to do a lot more reading and research before I would attempt my first flip. Also I'll probably wait until I have more cash on hand and can finance most of the flip myself...might be a couple of years yet, we'll see.

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  • Richard Redding
    Investor · Round Rock, TX · Member since 2013 · 42 posts · 34 votes
    11y

    I did my fist 4 flips while I had a full time job. Though, my wife, who also worked full time, helped a lot too.

    You should always expect to make money. We always run our numbers conservatively (round down the ARV, round up repair, holding, sales costs) and estimate we'll make 20k, or we back away. What happened so far was : +32k, +38k, -8k , +39k .

    Time per week... I'd guess 6-7 (my wife and I combined) hours per week on site maybe another hour or two on the phone per week.

    My tip is meet the neighbors and give them your number and ask them to call if anything is wrong. They can really mess things up for you if they want to... lonely people like to cause problems for others.

    Good luck and have fun. You're asking the right questions.

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