My 3rd Attempt Into Real Estate Investing (Flipping)

While it is still possible to do it with technically no money down (none of your own), the vast majority of people likely start with either their own or borrowed from a close family member. I took the family member approach, it was my mother who believed in my dream enough to lend me the startup that I needed.

Let’s talk about flipping.

Flipping houses, as the name implies, involves flipping an item of lower value and increasing the item to a higher value through hard work (AKA “Sweat equity”). There are different levels of flip; Light (Cosmetic), Medium, or Heavy (Full gut or To-the-studs). Many things can be flipped; cars, furniture, antiques at a thrift store and many other things on Craigslist or Facebook Marketplace.

Why flip?

You can build up capital quickly. I typically don’t pull the trigger on a flip opportunity unless it fits my metrics of something that I can get in and out of in about 4-5 months and potentially earn me $30-50k per deal. Rentals on the other hand, you’d STILL want to find a deal that requires some sweat equity (unless you have a lot of money to spend on turnkey) so you still have to do all the work of a flip PLUS since you’re not selling it now, you’ll be getting a nice $200-400 per door you rent out. Again, unless you found a BRRR which is a golden egg. So, $30,000-50,000 every 5 months or $2,000 every 5 months, take your pick.

Why NOT flip?

In my opinion, out of all of the investment strategies in real estate, flipping is the most risky. Wholesaling is basically risk-free because you don’t actually take title to anything and you just risk the marketing money you used to send out mailers and other advertising budgets.

Lease-Options is similar to wholesaling in that you don’t actually have any vested interest other than the controlling interest to sell the property when the Lease-Optionee decides to buy.

Rentals are a long-term play and unless you have too many vacancies or damages, even the worst purchase will eventually be a good one as the market is always projecting upwards over time and in 30 years, the property will be fully paid off and that's when the REAL money starts coming in.

So, flipping is the one that faces the largest risk in a weak market where this strategy is heavily reliant on strong house prices to sell for a nice profit. Coupled with the nature of investing in general, which is trying to get the highest ROI possible, most people either don’t have or choose not to use all of their liquidity on an all-cash purchase so Investments are usually leveraged with some type of loan possibly with a very high interest rate. This can quickly become like a game of hot potato if you are stuck paying monthly on a house in a slow market with nobody to sell to.

Ideally, you should plan for your exit strategy before you get to that point. Flips that don’t work out either become rentals until the market improves or become bankruptcies because funds ran out and refinance wasn't possible for some reason. The goal is to sell, but renting for a while is the next best thing.

Anyway, stay safe out there. It's a tough market right now. So, to flip or not to flip? Leave a comment below, would like to hear your thoughts.