If you’ve watched our show on HGTV, Flip or Flop, you know that Tarek and I have dealt with a few really crazy situations. While we make it look easy in front of the cameras, flipping houses is never straightforward, and it can be really hard. Don’t get me wrong—I love what we do. I wouldn’t change our decision to get into real estate investing for the world, but it is more difficult than it looks on TV.
There’s a lot that goes on behind the scenes when we’re flipping a house that you don’t get a real feel for when you’re watching our show at home. Even with all of the research we put into buying our flips, we never know what situation we’ll walk into. We know from experience that at least two major, unexpected things will throw a wrench in the works. We just never know which two. As Tarek says, “We always have to expect the unexpected!”
Let’s take a look at some of the things you should keep in mind before you get into flipping.
Do you have access to funding or the skills to pull together a deal without using any of your own money or credit?
First of all, flipping a house means having liquid investment money on hand. Now, that doesn’t mean you have to come up with the cash on your own. We didn’t save up all of our milk money for years and years before investing in our first flip. Doing real estate successfully is all about finding funding; you don’t actually have to spend a penny of your own money if you’re smart about it, but you do have to have it available.
This might seem completely obvious, but you’re going to need to make sure that you have the budget for more than just the purchase price of the house. You’ve seen the show. Tarek and I have walked into houses where all the windows were broken and there were all kinds of horrors waiting for us. We’ve had houses that came together easily, and we’ve had houses we had to completely demolish. If you’re going to start flipping, you need to plan for all of your funding needs so that you have the cash on hand to handle the worst-case scenarios—we typically budget an additional 30% for repairs to give ourselves breathing room for these unexpected “surprises.”
Do You Have a Success Team?
Next, we have access to some of the best contractors, construction specialists, attorneys, and private moneylenders around. We’re really lucky to know so many amazing people in the real estate industry, both through people we knew before and people we’ve met while working with HGTV. Having these guys’ and gals’ contact information on hand and knowing what we can expect them to charge for their services has helped us a lot as we’ve turned trash into treasure.
Do you have a success team you can count on? Is your phone full of contacts for people who work in real estate and construction? If so, fantastic. If not, make sure you get to a Success Path introductory training workshop when it’s next in your area so you can get introduced to some of the people in our network.
Can you make someone really fall in love with the house?
Finally, a lot of new flippers think that they just need to do the bare minimum to fix up and flip a house. That’s sometimes true, but in a competitive housing market, your house won’t sell unless you make it really attractive.
Take a look at the other houses on the market in the area where you’re buying. How long does it take them to sell on average? What kinds of renovations have been done? How large are they in comparison to your house? What kind of price do you need to get to make a profit from your property? What are some of the expected finishes? For example, in some neighborhoods granite countertops are an absolute must. In others, they’re a big point of distinction because they’re not common. You need to answer all these questions and figure out what kind of work you need to put into your house to get it ready to sell.
So, still think flipping houses is as easy as we make it look on TV? Like I said, it’s a lot of fun and a great business, but it’s also a lot of hard work!