Sell our current business to start full-time flipping?

Sell our current business to start full-time flipping?

Member since 2024 · 15 posts · 4 votes

My husband and I are considering selling our current business and reinvesting full time into house flipping (eventually then building our own real estate portfolio, as well). We would like to have more input from more experienced investors on the validity of this idea / any gaps we might be missing.

We currently own a remodeling company. We already have the construction experience/sub crews needed to flip homes anywhere within a 120 mile radius of Nashville, TN (including Chattanooga). My husband is Guatemalan and very well connected, plus he speaks Spanish which makes managing projects even easier for our crews. We are not real estate licensed, so that would be the biggest area of opportunity to learn (we'd use a realtor at least in the beginning).

We are considering selling the company because 1) my husband hates managing W2 employees/operations (but he loves working with subs) and 2) it would give us extra cash up front to reinvest. The downside is that our monthly income would go away, but he also would no longer have to manage the business, either, and can spend all of this time on the flips/building his wholesale side of the company.

After the sale of the company, we have:

  • 9-15 months of personal expenses in savings to live off of
  • Start with $100k cash and do micro flips to avoid the risk of a hard money lender and losing our tail if something doesn't go right or sell quick enough

  • Once the house sells, reinvest all the cash back into the next flip and continue doing this until we are doing multiple flips at a time (he can manage 4 large projects at a time by himself, so we assume up to 4 active flips at a time eventually)

Pros of doing this:

  • No longer having to manage W2 employees/operations (this used to be my role but now that we have kids I want to stay home, not do this)
  • Getting a larger chunk of cash to start flipping quicker vs waiting 1+ years to save enough cash for the first flip
  • Using cash reduces our risk of losing money with a hard money lender if the project takes longer to sell, rehab, etc. If the house takes longer to sell, we aren't losing money every month on interest payments and can hold for the right sell price.

Cons:

  • We lose our regular stable monthly income and have to rebuild again (we have done this before - this would be our 2nd "bootstrap, build, sell" business)
  • We lose our 5 year history when it comes to conventional mortgages and moving into a new home for our own family in the next 2-4 years

Thoughts / recommendations? Any input is appreciated! Thank you so much!

2Reply
136 views

Most Popular Reply

Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
2y

@Haley Elisabeth

A few things to point out/think about from someone that is active in your target market.

Have you done a flip before? Is this your first time?

It is absolutely nothing like the reality TV shows.

I would highly recommend you do a few flips on the side before you decide to go all in and sell your business.

Your biggest asset, in my opinion, is that your husband is a contractor and can run the jobs himself. In fact, this is the only way to have any chance of making a profit in the Nashville market. It is EXTREMELY competitive and the margins are very thin, so the more expense you can mitigate the better. I have never been able to make a flip work using a GC. I have always run jobs myself on flips.

How are you going to source your deals? Have you met with all the local wholesalers in the area? Are you on their lists?

For the market you are looking into, your start up capital of $100k is not going to get you anywhere. You might be able to find some deals in small towns that no one has heard of to get your start, but at best you are limited to one deal at a time. You have to factor in your timeline even more when you are doing 1 job at a time and depending on this income to live off of.

Think of it this way…you take on a flip, you spend 2 months on renovations, 1 month on market, 1 month under contract. You are conservatively looking at 4 months before you get paid. In your target price of small, inexpensive homes and markets how much are you actually going to make on a flip where your total investment is 100k? You might make 5k? 10k? In 4 months….

Honestly, best case scenario is you are turning your money instantly and you will then end up making 30k/year.

Your biggest problem is your start up capital is way too low if you’re not willing to use hard money. 500k – 750k is a much more realistic amount of capital you would need to self-fund your own deals. You can run multiple small deals at once, or run 1-2 larger deals at the same time. At this price point you are looking at profit margins of between 40-100k/deal which is actually worth your time given the amount of risk you are taking on.

I would highly recommend getting some hard money lenders on your list and see what they are offering. Keep your 100k for renovations, interest coverage, and maybe if you absolutely have to…downpayments.

You need to look into doing new construction as well. That is something that is working well in the greater Nashville area and your husbands GC experience is a massive risk mitigator. The loans are much cheaper than hard money and the margins are way better than flips.

All of this is just my opinion, but I’m not your Uncle Bob that has never bought a house before. I’m actually flipping, building and buying rentals in your target market so I have enough knowledge and scars to give some information that you should at the very least consider.

Feel free to reach out to me via PM if you would like to discuss the market more.

See this reply in the discussion

30 Replies

Jump to latestLatest
  • Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    2y

    Is the business able to be sellable? If it is not set up with systems and people in place to run it you will be mainly selling your book of business. I would not sell. If he hates managing he needs to hire that out and then use the extra time to start flipping. To throw all your eggs into the flipping basket without doing a deal to me is not wise. Do a few then decide about going all in. 

  • Member since 2024 · 15 posts · 4 votes
    2y
    Quote from @Caleb Brown:

    Is the business able to be sellable? If it is not set up with systems and people in place to run it you will be mainly selling your book of business. I would not sell. If he hates managing he needs to hire that out and then use the extra time to start flipping. To throw all your eggs into the flipping basket without doing a deal to me is not wise. Do a few then decide about going all in. 


    Thank you for your reply! It is sellable and we have had an assessment with a broker. We are just debating to follow through or not!

    We did try hiring out the manager in the past for 2 years - but my husband didn't manage that person well, so they didn't manage the employees well, and we ended up losing money. Employee management is not a strength of my husband (and he happily admits it!). 

  • Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    2y
    Quote from @Haley Elisabeth:
    Quote from @Caleb Brown:

    Is the business able to be sellable? If it is not set up with systems and people in place to run it you will be mainly selling your book of business. I would not sell. If he hates managing he needs to hire that out and then use the extra time to start flipping. To throw all your eggs into the flipping basket without doing a deal to me is not wise. Do a few then decide about going all in. 


    Thank you for your reply! It is sellable and we have had an assessment with a broker. We are just debating to follow through or not!

    We did try hiring out the manager in the past for 2 years - but my husband didn't manage that person well, so they didn't manage the employees well, and we ended up losing money. Employee management is not a strength of my husband (and he happily admits it!). 


     Well that's good. I would still push through and do a few deals before selling. You might hate flipping over running a GC business but I would not kill your income source. 

  • Lender · Playa del Carmen, México · Member since 2014 · 2k+ posts · 1k+ votes
    2y
    Quote from @Caleb Brown:
    Quote from @Haley Elisabeth:
    Quote from @Caleb Brown:

    Is the business able to be sellable? If it is not set up with systems and people in place to run it you will be mainly selling your book of business. I would not sell. If he hates managing he needs to hire that out and then use the extra time to start flipping. To throw all your eggs into the flipping basket without doing a deal to me is not wise. Do a few then decide about going all in. 


    Thank you for your reply! It is sellable and we have had an assessment with a broker. We are just debating to follow through or not!

    We did try hiring out the manager in the past for 2 years - but my husband didn't manage that person well, so they didn't manage the employees well, and we ended up losing money. Employee management is not a strength of my husband (and he happily admits it!). 


     Well that's good. I would still push through and do a few deals before selling. You might hate flipping over running a GC business but I would not kill your income source. 


    I'm ðŸ’¯ with Caleb on this: Test out your flipping plan before you sell your business!

    Has your business broker explained that the majority of businesses put on the market do not sell?

    And, even if you do find a seller, you're looking at a minimum of 6-12 months of due diligence and financial review.

    Plus, the new owner is likely going to want you both to stay on for a least a little while after the sale!

    The time to find out if flipping is a viable pivot is now, while you still have income!

  • Karen WanamartaBusiness Member
    Investor · Knoxville TN · Member since 2024 · 55 posts · 17 votes
    2y

    @Haley Elisabeth I would not sell a stable business, especially if you are new to flipping. Flips are sitting on the market longer, inventory is up and demand is down year over year. I would use hard money to start. Paying interest is better than not being able to access your money unless you can comfortably take a 100k swing in your finances. If you have enough equity in your personal home, you could consider doing a cash out refi and using that to start your flips. Happy to talk more in depth. Feel free to DM. 

  • Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
    2y

    @Haley Elisabeth

    A few things to point out/think about from someone that is active in your target market.

    Have you done a flip before? Is this your first time?

    It is absolutely nothing like the reality TV shows.

    I would highly recommend you do a few flips on the side before you decide to go all in and sell your business.

    Your biggest asset, in my opinion, is that your husband is a contractor and can run the jobs himself. In fact, this is the only way to have any chance of making a profit in the Nashville market. It is EXTREMELY competitive and the margins are very thin, so the more expense you can mitigate the better. I have never been able to make a flip work using a GC. I have always run jobs myself on flips.

    How are you going to source your deals? Have you met with all the local wholesalers in the area? Are you on their lists?

    For the market you are looking into, your start up capital of $100k is not going to get you anywhere. You might be able to find some deals in small towns that no one has heard of to get your start, but at best you are limited to one deal at a time. You have to factor in your timeline even more when you are doing 1 job at a time and depending on this income to live off of.

    Think of it this way…you take on a flip, you spend 2 months on renovations, 1 month on market, 1 month under contract. You are conservatively looking at 4 months before you get paid. In your target price of small, inexpensive homes and markets how much are you actually going to make on a flip where your total investment is 100k? You might make 5k? 10k? In 4 months….

    Honestly, best case scenario is you are turning your money instantly and you will then end up making 30k/year.

    Your biggest problem is your start up capital is way too low if you’re not willing to use hard money. 500k – 750k is a much more realistic amount of capital you would need to self-fund your own deals. You can run multiple small deals at once, or run 1-2 larger deals at the same time. At this price point you are looking at profit margins of between 40-100k/deal which is actually worth your time given the amount of risk you are taking on.

    I would highly recommend getting some hard money lenders on your list and see what they are offering. Keep your 100k for renovations, interest coverage, and maybe if you absolutely have to…downpayments.

    You need to look into doing new construction as well. That is something that is working well in the greater Nashville area and your husbands GC experience is a massive risk mitigator. The loans are much cheaper than hard money and the margins are way better than flips.

    All of this is just my opinion, but I’m not your Uncle Bob that has never bought a house before. I’m actually flipping, building and buying rentals in your target market so I have enough knowledge and scars to give some information that you should at the very least consider.

    Feel free to reach out to me via PM if you would like to discuss the market more.

  • Real Estate Broker · San Diego, CA · Member since 2016 · 187 posts · 117 votes
    2y

    Hello Haley,

    I sent you a request to connect.  I will be in Nashville 8/3 to 8/5 meeting with fellow investors. let's meet for coffee.

  • Specialist · NJ · Member since 2022 · 1k+ posts · 649 votes
    2y

    Starting with 100k and not using financing is risky.  Let's say you find something for 40k purchase and it needs 50k to get it worth 170k.  That's a 90k project cost and you have 100k. If anything unforseen happens you can go under.

    100k is a real solid amount to start with a nice cookie cutter project with financing.  Like a 70k - 90k purchase with a 50 - 60k rehab.  B neighborhood of a blue collar market, active resale value because of price range and desirability.  If you used financing, you'd be into the deal for maybe 15k - 20k as opposed to 90k.

    Anyone who does their homework with hard money can easily find out all about the market, the programs, the costs of it and what the rates are. People have bad experiences with HML because maybe the rep they were speaking to was bad at their job. Across all the pieces needed to come together to pull a RE transaction off: Borrower - Lender - Insurance - Title - Sometimes Broker. Sometimes you get someone in the group that is just terrible at their job. Unresponsive, unknowledgeable, unhelpful. I can't tell you how many times I had to pick up the ball and do someone else's job besides mine in the process or else I'd never close the deal.

    Hard Money terms you can find:

    If brand spanking new and are a 0% - you will find 75% or 80%, maybe 85% if the deal spread is very good and your credit is very good. But you can get in the game for sure at 75%/80% LTV. Once you have three done, and you continue to bring good deals, and your credit stays where it is, and you've exited all three previuos deals no problem, then now you can get 85%/90% LTC.

    Rates?  Rates can be anywhere from 10.49% - 12%.  I'm starting to see some 9.99% out there for the 5+ investors with good credit.  Don't get caught up on rate for a short term loan with interest only payments.  You home to only make 3 payments and then either list to sell or refi, maybe 5 payments max.  The difference between 10.49% and 12% over 12 payments is marginal.  maybe 50 bucks. 

    If you are out there finding the projects with the sub 70% project cost to ARV the difference between 11.25 and 11.99 is neither here no there.

    I been at the practice of setting networks up now for two years.  I've had clients successfully close on 30+ deals in two different markets.  Here's your issue, ready?  Inventory.  That's why there has to be at least 5 - 6 viable networks set up.  Viable networks = solid vendors in place on the ground: Agents/Contractors/Wholesalers.  Serious working pros that are honest and communicative.  This is very hard to find.  I've been through 7 GCs, I've closed deals with 6 - 8 different agents - some good and some terrible.  I have one gem that brings me 75% of my deals in one of my markets.  He hustles off market listings and brings it right to me and then I get an exclusive property to show.  He has great Sub connections too as he has flipped several properties in the market.

    Comparable financing is everywhere, it's not anyone's road block if you are ready and by ready I mean you have decent credit and 50k.  Getting financed when ready is no issue.

    The Market choice, and then the building of the infrastructure that will produce solid opportunity is very, very hard.  Here's why.  People promise the world, but until you get in bed with them do you really know if they are all talk or not.  So it is alot of trial and error with people, and I can tell you that it is error more than not - that's my experience and I have been on the phone with vendors from at least 8 - 10 different markets all across the US in the last 2 years and some are good and knowledgeable and helpful and other you hang up wondering how the hell they make money doing what. they're doing.

  • Denis PonderPro Member
    New to Real Estate · Yuma, AZ · Member since 2023 · 280 posts · 246 votes
    2y

    Agree with others, don't sell until you have done a few and determine if you like it. I would recommend just doing BRRRR projects to build the portfolio now, while you are still running the business. You will know that the remodels are done well/properly, so you can hire out the PM piece and move forward. Plus, you can likely get better margins, or run on thinner margins to acquire a property in a very desirable area since you are doing much of the work in house. You could have a really solid portfolio in a relatively short period of time.

    How are W2 employees different than subs?  Both are people that require communication and accountability.

  • Member since 2024 · 15 posts · 4 votes
    2y
    Quote from @Mitch Messer:
    Quote from @Caleb Brown:
    Quote from @Haley Elisabeth:
    Quote from @Caleb Brown:

    Is the business able to be sellable? If it is not set up with systems and people in place to run it you will be mainly selling your book of business. I would not sell. If he hates managing he needs to hire that out and then use the extra time to start flipping. To throw all your eggs into the flipping basket without doing a deal to me is not wise. Do a few then decide about going all in. 


    Thank you for your reply! It is sellable and we have had an assessment with a broker. We are just debating to follow through or not!

    We did try hiring out the manager in the past for 2 years - but my husband didn't manage that person well, so they didn't manage the employees well, and we ended up losing money. Employee management is not a strength of my husband (and he happily admits it!). 


     Well that's good. I would still push through and do a few deals before selling. You might hate flipping over running a GC business but I would not kill your income source. 


    I'm ðŸ’¯ with Caleb on this: Test out your flipping plan before you sell your business!

    Has your business broker explained that the majority of businesses put on the market do not sell?

    And, even if you do find a seller, you're looking at a minimum of 6-12 months of due diligence and financial review.

    Plus, the new owner is likely going to want you both to stay on for a least a little while after the sale!

    The time to find out if flipping is a viable pivot is now, while you still have income!


    Thank you SO much for taking the time to reply and share your input! We really appreciate it! It's been very helpful.

  • Member since 2024 · 15 posts · 4 votes
    2y
    Quote from @Mike Klarman:

    Starting with 100k and not using financing is risky.  Let's say you find something for 40k purchase and it needs 50k to get it worth 170k.  That's a 90k project cost and you have 100k. If anything unforseen happens you can go under.

    100k is a real solid amount to start with a nice cookie cutter project with financing.  Like a 70k - 90k purchase with a 50 - 60k rehab.  B neighborhood of a blue collar market, active resale value because of price range and desirability.  If you used financing, you'd be into the deal for maybe 15k - 20k as opposed to 90k.

    Anyone who does their homework with hard money can easily find out all about the market, the programs, the costs of it and what the rates are. People have bad experiences with HML because maybe the rep they were speaking to was bad at their job. Across all the pieces needed to come together to pull a RE transaction off: Borrower - Lender - Insurance - Title - Sometimes Broker. Sometimes you get someone in the group that is just terrible at their job. Unresponsive, unknowledgeable, unhelpful. I can't tell you how many times I had to pick up the ball and do someone else's job besides mine in the process or else I'd never close the deal.

    Hard Money terms you can find:

    If brand spanking new and are a 0% - you will find 75% or 80%, maybe 85% if the deal spread is very good and your credit is very good. But you can get in the game for sure at 75%/80% LTV. Once you have three done, and you continue to bring good deals, and your credit stays where it is, and you've exited all three previuos deals no problem, then now you can get 85%/90% LTC.

    Rates?  Rates can be anywhere from 10.49% - 12%.  I'm starting to see some 9.99% out there for the 5+ investors with good credit.  Don't get caught up on rate for a short term loan with interest only payments.  You home to only make 3 payments and then either list to sell or refi, maybe 5 payments max.  The difference between 10.49% and 12% over 12 payments is marginal.  maybe 50 bucks. 

    If you are out there finding the projects with the sub 70% project cost to ARV the difference between 11.25 and 11.99 is neither here no there.

    I been at the practice of setting networks up now for two years.  I've had clients successfully close on 30+ deals in two different markets.  Here's your issue, ready?  Inventory.  That's why there has to be at least 5 - 6 viable networks set up.  Viable networks = solid vendors in place on the ground: Agents/Contractors/Wholesalers.  Serious working pros that are honest and communicative.  This is very hard to find.  I've been through 7 GCs, I've closed deals with 6 - 8 different agents - some good and some terrible.  I have one gem that brings me 75% of my deals in one of my markets.  He hustles off market listings and brings it right to me and then I get an exclusive property to show.  He has great Sub connections too as he has flipped several properties in the market.

    Comparable financing is everywhere, it's not anyone's road block if you are ready and by ready I mean you have decent credit and 50k.  Getting financed when ready is no issue.

    The Market choice, and then the building of the infrastructure that will produce solid opportunity is very, very hard.  Here's why.  People promise the world, but until you get in bed with them do you really know if they are all talk or not.  So it is alot of trial and error with people, and I can tell you that it is error more than not - that's my experience and I have been on the phone with vendors from at least 8 - 10 different markets all across the US in the last 2 years and some are good and knowledgeable and helpful and other you hang up wondering how the hell they make money doing what. they're doing.


     Thank you so much for your reply and this perspective! It's very interesting and really helpful. If you do have the time (I understand if not), I'd love to ask a few follow up questions.

    You mentioned: "Starting with 100k and not using financing is risky. Let's say you find something for 40k purchase and it needs 50k to get it worth 170k. That's a 90k project cost and you have 100k. If anything unforseen happens you can go under."

    What do you mean by "going under"? To our understanding, if we are paying for it in cash we just hold it in cash until it's fully completed and sells - no rush on selling because of interest payments, etc. I'm assuming we are missing something. 

    "Don't get caught up on rate for a short term loan with interest only payments. You home to only make 3 payments and then either list to sell or refi, maybe 5 payments max." 


    Do you mind elaborating a bit more on this, please? When we have spoken with HML, it seems that the interest payments are a big portion of the "make or break" of the deal. If the flip takes longer to sell, for example, it takes up a large amount of the profit and many have to sell for a desperately low amount just to get out. That's why we assumed starting with cash and just building a cash portfolio to save us from taking a huge loss.

    Thank you so much again!

  • Member since 2024 · 15 posts · 4 votes
    2y
    Quote from @Denis Ponder:

    Agree with others, don't sell until you have done a few and determine if you like it. I would recommend just doing BRRRR projects to build the portfolio now, while you are still running the business. You will know that the remodels are done well/properly, so you can hire out the PM piece and move forward. Plus, you can likely get better margins, or run on thinner margins to acquire a property in a very desirable area since you are doing much of the work in house. You could have a really solid portfolio in a relatively short period of time.

    How are W2 employees different than subs?  Both are people that require communication and accountability.

     Thank you so much for your reply! I really appreciate it. Having many people agreeing is also very helpful.

    Subs do require accountability yes - it's not quite that piece that is the struggle. They're paid by the job and if their performance ever decreases (which can happen - they're great for a time and eventually for whatever reason their quality, timeliness, etc declines) then it's easier to phase them out & replace them with a different crew. 

    When it comes to W2 employees, it involves HR, expectations, paying them whether they have enough leads or projects to fill their day or not, managing higher expectations (W2 employees seem to be much more "picky"), and overall they are just more expensive. If their performance drops, it requires much documentation, performance reviews, fix it plans, etc. etc. because if we fire them without heavy documentation, now we pay unemployment. They need a lot more training & accountability on systems and processes vs. the subs coming in just to do their trade they are highly skilled in. And they're much harder to hire vs. subs (my husband is very good at building his sub network - it comes very naturally to him). It's a very different relationship overall and more "gray" with W2 than "black and white" with subs. Working with W2 employees was always my skillset, but it's not something I can do anymore with our kiddos.

  • Member since 2024 · 15 posts · 4 votes
    2y
    Quote from @Mitch Messer:
    Quote from @Caleb Brown:
    Quote from @Haley Elisabeth:
    Quote from @Caleb Brown:

    Is the business able to be sellable? If it is not set up with systems and people in place to run it you will be mainly selling your book of business. I would not sell. If he hates managing he needs to hire that out and then use the extra time to start flipping. To throw all your eggs into the flipping basket without doing a deal to me is not wise. Do a few then decide about going all in. 


    Thank you for your reply! It is sellable and we have had an assessment with a broker. We are just debating to follow through or not!

    We did try hiring out the manager in the past for 2 years - but my husband didn't manage that person well, so they didn't manage the employees well, and we ended up losing money. Employee management is not a strength of my husband (and he happily admits it!). 


     Well that's good. I would still push through and do a few deals before selling. You might hate flipping over running a GC business but I would not kill your income source. 


    I'm ðŸ’¯ with Caleb on this: Test out your flipping plan before you sell your business!

    Has your business broker explained that the majority of businesses put on the market do not sell?

    And, even if you do find a seller, you're looking at a minimum of 6-12 months of due diligence and financial review.

    Plus, the new owner is likely going to want you both to stay on for a least a little while after the sale!

    The time to find out if flipping is a viable pivot is now, while you still have income!

    Thank you so much! It's helpful to hear the perspective outside the broker. For a company our size, we were told more like 1-2 months of due diligence and 1 month of staying on, but we have nothing to truly compare that to in the "real world".  I appreciate your input - very helpful! 
  • Member since 2024 · 15 posts · 4 votes
    2y
    Quote from @Tony Savage:

    Hello Haley,

    I sent you a request to connect.  I will be in Nashville 8/3 to 8/5 meeting with fellow investors. let's meet for coffee.


     Thank you so much! I will reach out!

  • Member since 2024 · 15 posts · 4 votes
    2y
    Quote from @Karen Wanamarta:

    @Haley Elisabeth I would not sell a stable business, especially if you are new to flipping. Flips are sitting on the market longer, inventory is up and demand is down year over year. I would use hard money to start. Paying interest is better than not being able to access your money unless you can comfortably take a 100k swing in your finances. If you have enough equity in your personal home, you could consider doing a cash out refi and using that to start your flips. Happy to talk more in depth. Feel free to DM. 


     Thank you for taking your time to reply! We really appreciate it. Good to hear from a local voice, as well!

  • Lender · Playa del Carmen, México · Member since 2014 · 2k+ posts · 1k+ votes
    2y
    Quote from @Haley Elisabeth:
    Quote from @Mitch Messer:
    Quote from @Caleb Brown:
    Quote from @Haley Elisabeth:
    Quote from @Caleb Brown:

    Is the business able to be sellable? If it is not set up with systems and people in place to run it you will be mainly selling your book of business. I would not sell. If he hates managing he needs to hire that out and then use the extra time to start flipping. To throw all your eggs into the flipping basket without doing a deal to me is not wise. Do a few then decide about going all in. 


    Thank you for your reply! It is sellable and we have had an assessment with a broker. We are just debating to follow through or not!

    We did try hiring out the manager in the past for 2 years - but my husband didn't manage that person well, so they didn't manage the employees well, and we ended up losing money. Employee management is not a strength of my husband (and he happily admits it!). 


     Well that's good. I would still push through and do a few deals before selling. You might hate flipping over running a GC business but I would not kill your income source. 


    I'm ðŸ’¯ with Caleb on this: Test out your flipping plan before you sell your business!

    Has your business broker explained that the majority of businesses put on the market do not sell?

    And, even if you do find a seller, you're looking at a minimum of 6-12 months of due diligence and financial review.

    Plus, the new owner is likely going to want you both to stay on for a least a little while after the sale!

    The time to find out if flipping is a viable pivot is now, while you still have income!

    Thank you so much! It's helpful to hear the perspective outside the broker. For a company our size, we were told more like 1-2 months of due diligence and 1 month of staying on, but we have nothing to truly compare that to in the "real world".  I appreciate your input - very helpful! 

    Yes, to be fair, if it's a straight-forward all-cash purchase, then the due-diligence likely could be done in 60 days or so. I was being too pessimistic in that regard.

    I'm glad the overall message was received as intended!

  • Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
    2y
    Quote from @Tony Savage:

    Hello Haley,

    I sent you a request to connect.  I will be in Nashville 8/3 to 8/5 meeting with fellow investors. let's meet for coffee.

    Let's meet up
  • Flipper/Rehabber · CA · Member since 2023 · 1k+ posts · 1k+ votes
    2y
    Quote from @Haley Elisabeth:

    My husband and I are considering selling our current business and reinvesting full time into house flipping (eventually then building our own real estate portfolio, as well). We would like to have more input from more experienced investors on the validity of this idea / any gaps we might be missing.

    We currently own a remodeling company. We already have the construction experience/sub crews needed to flip homes anywhere within a 120 mile radius of Nashville, TN (including Chattanooga). My husband is Guatemalan and very well connected, plus he speaks Spanish which makes managing projects even easier for our crews. We are not real estate licensed, so that would be the biggest area of opportunity to learn (we'd use a realtor at least in the beginning).

    We are considering selling the company because 1) my husband hates managing W2 employees/operations (but he loves working with subs) and 2) it would give us extra cash up front to reinvest. The downside is that our monthly income would go away, but he also would no longer have to manage the business, either, and can spend all of this time on the flips/building his wholesale side of the company.

    After the sale of the company, we have:

    • 9-15 months of personal expenses in savings to live off of
    • Start with $100k cash and do micro flips to avoid the risk of a hard money lender and losing our tail if something doesn't go right or sell quick enough

    • Once the house sells, reinvest all the cash back into the next flip and continue doing this until we are doing multiple flips at a time (he can manage 4 large projects at a time by himself, so we assume up to 4 active flips at a time eventually)

    Pros of doing this:

    • No longer having to manage W2 employees/operations (this used to be my role but now that we have kids I want to stay home, not do this)
    • Getting a larger chunk of cash to start flipping quicker vs waiting 1+ years to save enough cash for the first flip
    • Using cash reduces our risk of losing money with a hard money lender if the project takes longer to sell, rehab, etc. If the house takes longer to sell, we aren't losing money every month on interest payments and can hold for the right sell price.

    Cons:

    • We lose our regular stable monthly income and have to rebuild again (we have done this before - this would be our 2nd "bootstrap, build, sell" business)
    • We lose our 5 year history when it comes to conventional mortgages and moving into a new home for our own family in the next 2-4 years

    Thoughts / recommendations? Any input is appreciated! Thank you so much!


    At my peak had 27 electricians, the last 2 just retired. Now I do industrial work and flip by myself. Its liberating to be free of w2's!

    Ease into it until you hit your numbers then sell. Hope you guys crush it!

  • Denis PonderPro Member
    New to Real Estate · Yuma, AZ · Member since 2023 · 280 posts · 246 votes
    2y
    Quote from @Haley Elisabeth:
    Quote from @Denis Ponder:

    Agree with others, don't sell until you have done a few and determine if you like it. I would recommend just doing BRRRR projects to build the portfolio now, while you are still running the business. You will know that the remodels are done well/properly, so you can hire out the PM piece and move forward. Plus, you can likely get better margins, or run on thinner margins to acquire a property in a very desirable area since you are doing much of the work in house. You could have a really solid portfolio in a relatively short period of time.

    How are W2 employees different than subs?  Both are people that require communication and accountability.

     Thank you so much for your reply! I really appreciate it. Having many people agreeing is also very helpful.

    Subs do require accountability yes - it's not quite that piece that is the struggle. They're paid by the job and if their performance ever decreases (which can happen - they're great for a time and eventually for whatever reason their quality, timeliness, etc declines) then it's easier to phase them out & replace them with a different crew. 

    When it comes to W2 employees, it involves HR, expectations, paying them whether they have enough leads or projects to fill their day or not, managing higher expectations (W2 employees seem to be much more "picky"), and overall they are just more expensive. If their performance drops, it requires much documentation, performance reviews, fix it plans, etc. etc. because if we fire them without heavy documentation, now we pay unemployment. They need a lot more training & accountability on systems and processes vs. the subs coming in just to do their trade they are highly skilled in. And they're much harder to hire vs. subs (my husband is very good at building his sub network - it comes very naturally to him). It's a very different relationship overall and more "gray" with W2 than "black and white" with subs. Working with W2 employees was always my skillset, but it's not something I can do anymore with our kiddos.

    Fair enough, that makes sense!  Best of luck!

    Best thing I can say now is take your time!  Slow is smooth, smooth is fast.  

  • Aaron GiggersPro Member
    Member since 2021 · 1 post · 0 votes
    2y

    @Caleb Brown I love this answer. You definitely would have to streamline and systematize the busniess before its marketable. I would do this anyway to relieve yourself a bit (of time and stress). If you already have a structured business why start from scratch again? Find a way to (eventually) incorporate flipping into your business.

  • Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes
    2y

    I have not read all the responses yet, but just on the face of this I would not fully pull out of a business that is stable, which provides stable income to go into full time flipping. Id either leave my spouse, or a partner, or someone I can train to run that while I get my feet wet with the flipping to see how it goes. You say he didnt like managing that other person. What if you sell, get in, and figure out you dont like managing the 10 thousand aspects of flipping from beginning to end. The plan sounds great and cool mapped out on keyboards but flipping rarely goes that smooth. Its vastly erratic and unpredictable. Things can be going great for 2 months then be headed for disaster the next week. Markets change all the time. Flipping can be feasible in one area for years and be a total bust the next year when every project comes in at a loss. Can you handle all that if you have to eat from those profits? Its great you have the construction experience to back you up but good luck on depending on this to consistently provide. My advice is to keep what you have running. Find someone who you do like managing to manage it and keep it moving. Start flipping on the side  and once that experience is on par and you have determined you like it, then move on it. You are ahead of the curve to some degree compared to others, but most moving into this space now lose. Most quit during or after the first project. Those that stick around, they continue to lose until they understand fully what they have embarked on. Construction is great, but flipping has dozens of moving parts simultaneously, with hundreds of elements to manage. What if you dont like managing any of those aspects? Best of luck but that is my advice. 

  • Member since 2024 · 15 posts · 4 votes
    2y
    Quote from @Aaron Giggers:

    @Caleb Brown I love this answer. You definitely would have to streamline and systematize the busniess before its marketable. I would do this anyway to relieve yourself a bit (of time and stress). If you already have a structured business why start from scratch again? Find a way to (eventually) incorporate flipping into your business.


     Thank you so much for your reply & advice! We really appreciate it.

  • Member since 2024 · 15 posts · 4 votes
    2y
    Quote from @Mark Cruse:

    I have not read all the responses yet, but just on the face of this I would not fully pull out of a business that is stable, which provides stable income to go into full time flipping. Id either leave my spouse, or a partner, or someone I can train to run that while I get my feet wet with the flipping to see how it goes. You say he didnt like managing that other person. What if you sell, get in, and figure out you dont like managing the 10 thousand aspects of flipping from beginning to end. The plan sounds great and cool mapped out on keyboards but flipping rarely goes that smooth. Its vastly erratic and unpredictable. Things can be going great for 2 months then be headed for disaster the next week. Markets change all the time. Flipping can be feasible in one area for years and be a total bust the next year when every project comes in at a loss. Can you handle all that if you have to eat from those profits? Its great you have the construction experience to back you up but good luck on depending on this to consistently provide. My advice is to keep what you have running. Find someone who you do like managing to manage it and keep it moving. Start flipping on the side  and once that experience is on par and you have determined you like it, then move on it. You are ahead of the curve to some degree compared to others, but most moving into this space now lose. Most quit during or after the first project. Those that stick around, they continue to lose until they understand fully what they have embarked on. Construction is great, but flipping has dozens of moving parts simultaneously, with hundreds of elements to manage. What if you dont like managing any of those aspects? Best of luck but that is my advice. 

    Hi Mark! Thank you so much for your help and input. It's helpful to hear so many perspectives on this & the other aspects of flipping beyond construction.

    When you mention the other elements to manage beyond construction - do you mean the real estate side of buying/selling/financing or is there more than that you are referring to?

  • Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes
    2y
    Quote from @Haley Elisabeth:
    Quote from @Mark Cruse:

    I have not read all the responses yet, but just on the face of this I would not fully pull out of a business that is stable, which provides stable income to go into full time flipping. Id either leave my spouse, or a partner, or someone I can train to run that while I get my feet wet with the flipping to see how it goes. You say he didnt like managing that other person. What if you sell, get in, and figure out you dont like managing the 10 thousand aspects of flipping from beginning to end. The plan sounds great and cool mapped out on keyboards but flipping rarely goes that smooth. Its vastly erratic and unpredictable. Things can be going great for 2 months then be headed for disaster the next week. Markets change all the time. Flipping can be feasible in one area for years and be a total bust the next year when every project comes in at a loss. Can you handle all that if you have to eat from those profits? Its great you have the construction experience to back you up but good luck on depending on this to consistently provide. My advice is to keep what you have running. Find someone who you do like managing to manage it and keep it moving. Start flipping on the side  and once that experience is on par and you have determined you like it, then move on it. You are ahead of the curve to some degree compared to others, but most moving into this space now lose. Most quit during or after the first project. Those that stick around, they continue to lose until they understand fully what they have embarked on. Construction is great, but flipping has dozens of moving parts simultaneously, with hundreds of elements to manage. What if you dont like managing any of those aspects? Best of luck but that is my advice. 

    Hi Mark! Thank you so much for your help and input. It's helpful to hear so many perspectives on this & the other aspects of flipping beyond construction.

    When you mention the other elements to manage beyond construction - do you mean the real estate side of buying/selling/financing or is there more than that you are referring to?

     Your construction background covers much. I assume you know how to manage your contractors. You know how to get your permits. Know how to manage your subs. I assume you know how to interact with your architects and engineers. If you are in a left leaning area, do you know how to manage bureaucracy? If in a low income area and a squatter breaks in and sets up shop, they can stay there a year before you can put them out. Do you know how to mitigate if someone comes in and steals your appliances or HVAC? What happens if you have to go get your project approved by the local ANC? Suppose you have to go and get permission for a variance? I was all ready to get my Certificate of occupancy and they told me I needed a landscaping plan for all the trees  I needed to replace. 2k for that.  Do you know how to manage your relationship with your lender? Do you know how to relate to neighbors in the community? If it goes sideways with them, things can get rough for you. If you have rain water run off to their yard they will get you finned. If you dont get your project done in a certain time frame from DC, you get a special tax or abandoned building fee for maybe 20k a month. If you have to go through the utilities companies for city hook ups or gas or electric? I had to work with them to dig a conduit ditch  8 feet deep to get a transformer added. Its so much much more.   The list goes on. 

  • Member since 2024 · 33 posts · 15 votes
    2y
    Quote from @Haley Elisabeth:

    My husband and I are considering selling our current business and reinvesting full time into house flipping (eventually then building our own real estate portfolio, as well). We would like to have more input from more experienced investors on the validity of this idea / any gaps we might be missing.

    We currently own a remodeling company. We already have the construction experience/sub crews needed to flip homes anywhere within a 120 mile radius of Nashville, TN (including Chattanooga). My husband is Guatemalan and very well connected, plus he speaks Spanish which makes managing projects even easier for our crews. We are not real estate licensed, so that would be the biggest area of opportunity to learn (we'd use a realtor at least in the beginning).

    We are considering selling the company because 1) my husband hates managing W2 employees/operations (but he loves working with subs) and 2) it would give us extra cash up front to reinvest. The downside is that our monthly income would go away, but he also would no longer have to manage the business, either, and can spend all of this time on the flips/building his wholesale side of the company.

    After the sale of the company, we have:

    • 9-15 months of personal expenses in savings to live off of
    • Start with $100k cash and do micro flips to avoid the risk of a hard money lender and losing our tail if something doesn't go right or sell quick enough

    • Once the house sells, reinvest all the cash back into the next flip and continue doing this until we are doing multiple flips at a time (he can manage 4 large projects at a time by himself, so we assume up to 4 active flips at a time eventually)

    Pros of doing this:

    • No longer having to manage W2 employees/operations (this used to be my role but now that we have kids I want to stay home, not do this)
    • Getting a larger chunk of cash to start flipping quicker vs waiting 1+ years to save enough cash for the first flip
    • Using cash reduces our risk of losing money with a hard money lender if the project takes longer to sell, rehab, etc. If the house takes longer to sell, we aren't losing money every month on interest payments and can hold for the right sell price.

    Cons:

    • We lose our regular stable monthly income and have to rebuild again (we have done this before - this would be our 2nd "bootstrap, build, sell" business)
    • We lose our 5 year history when it comes to conventional mortgages and moving into a new home for our own family in the next 2-4 years

    Thoughts / recommendations? Any input is appreciated! Thank you so much!


     Haley, if you are looking to get your toes wet with flipping in the greater Nashville area, I am happy to connect and share contacts! Best of luck to you and your husband! 

Join the conversationCreate a free account to reply, vote on answers and follow this thread.