New Flipper - Would love some advice

[Mo Farraj]

Hello all, my name is Mo. Very happy to be part of this forum, and was hoping I could gain some advice from you wonderful people. I have a finance background, I've been day trading for over 7 years now. I've decided to move my focus into real estate because trading has become almost impossible with the growing use of algorithms. From listening to the podcast, and reading over some of your posts - I have some questions I hope you guys can help me answer.

1. Any big advantage/disadvantage to buying and flipping vs leasing out to tenants? What is your preference?

2. What is the average time to flip a property in your own experience? (I see many people take 2+ years to do so - I was hoping someone can elaborate to why it takes so long.)

3. What are 3 things you look for when you want to make a flip, what is on your checklist before actually making the commitment in an investment?

4. For those who have tested the waters - would you mind sharing your biggest mistake and how you could've avoided it when you first made an investment in a property?

5. What is something you wish you had known before making your first investment? What could have saved you thousands of dollars?

6. Last but not least - I would love to know your personal motivation in real estate. Throughout my life I've met people who flip homes and only make a few grand on a deal that took 6+ months. Why not get a full time job as opposed to waiting so long to make a few bucks? (I'm hoping someone can prove me wrong - and share a success story or the potential in real estate).

Thank you all for any help, have a wonderful day!

Best,
Mo

[Will Barnard]

I will touch on a few of your questions.

1. Advantage of flipping is big profits quickly to increase capital. I also think it is fun. Plus you create a nice home for somebody to live in, increase tax revenues, and better the community. Disadvantages - higher tax rates (income is taxed at your marginal tax rate and not on capital gains which is a lower rate). Once you stop flipping, the income stops. Advantages of holding - tax benefits, income stream, appreciation which can periodically be cashed in on tax free from cash out refinloan proceeds. Disadvantages - dealing with tenants, dealing with repairs and property managers, larger time frame to large sum profits.

2.There is no average time as every deal is different and every investor strategy and ability is different. That said, simple rehab projects if done full time and correctly should expect to have about a week per $10,000 of budget plus an additional week or 2 for clean up, market ready items, misc. You may also need small additional time to allow for staging if you do that. This of course does not take into account timeframes for waiting on city permits, plan check, inspections, etc. For bigger projects,  have done double and triple that amount each week.

3. Numbers, location, and market condition.

4. Biggest common mistakes are overestimating ARV and underestimating rehab numbers. My personal big mistakes have been - buying home with converted garage and only car port (buyers here in So Cal, especially the guys, want/need a garage), bought a house with 55 stairs from street to front door - never again, and largest financial mistake was not going with my gut and chose to go with a new agent to list a multi million dollar property rather than my proven agent or myself. Key point, don't buy properties with major negatives like no garage, on busy streets, that back up to railroad tracks, in airport flight paths, etc. These negatives are difficult to overcome and dramatically hurt your exit value.