Your First Flip

Who doesn’t dream about making some extra money to supplement their annual income?

Earn some extra cash to enjoy a better lifestyle?

And where better to make money than investing in the real estate market? After all, it looks so easy.

So, buying a property, renovating, repairing and “flipping” it should be easy. Shouldn’t it?

Certainly, the plethora of TV shows about flipping real estate make it look like so much fun; so lucrative; so, well…., easy!

But it’s not. Believe me.

And the first time you try to buy and flip a property will be your toughest. Believe me again.

Why? Well, here are some simple reasons why it will be a challenge:

• Many people who buy and flip property are, at least initially, holding down another job. They see flipping as a way to supplement their annual income. Even real estate agents who are already in the property business usually start to undertake flipping as a “side hustle”. To manage a repair and renovation project when you are engaged full-time elsewhere can be tough and draining, and leave you little spare time for anything else.

• Quick, effective decisions are that much harder to make. No-one wants to make a mistake and lose money. Especially on their first real estate venture. Caution, therefore, becomes the name of the game. It’s easy to dwell on decisions about things such as a new color scheme or whether to upgrade counter tops for potentially higher resale value.

• Lack of experience: coupled with the above point, unless you have managed contractors before or have a good idea about building structures and repairs, doing so for the first time will be a steep learning curve. Having the experience to make the right cost-effective decisions can make a huge difference between making good money; breaking even or, the unthinkable: a loss.

• The tendency with your first flip is to want to make everything absolutely perfect, maybe even overthink some smaller issues. That’s not really the idea. The idea is to make some money by buying low and selling high. Create a safe, presentable, and marketable property by all means, but you’re not going to live in it, so do just enough to move the property on at a profit for the market area. 

• You may over analyse the market and the sales price you expect to achieve. Sure, you need to know what has been sold recently and what type of property is in demand. Plus, you’ll need knowledge about any future likely macro changes to the neighborhood where the property is located, and which affect the price.

But the key thing for your first flip is to make a profit. Your profit may be a few dollars less than you really want, but don’t turn down an offer or lose a purchaser for the sake of a few hundred dollars on your expected returns.

Look at your opportunity costs, take the proceeds and move on to the next flip.

Next time will be easier. For sure.