Is a Flipper’s Life Right for You?
Find It, Fix It, Flip It
June 7, 2018
Creative Strategist, Ninety-Nine Hats
We interviewed two flippers at different stages of the profession. Here’s what they had to say.
It all started with real estate agent Amy Paul’s father-in-law. Retired and itching for something to do, he suggested they partner on flipping houses. That was 2005; Paul and her husband are still doing it today.
“I kind of do it on the side, to be honest,” Paul says. “I’m fine if I do two to three houses a year.”
For many trying to get into the business of flipping, just the thought of those two to three houses a year sounds like success. Case in point: Sandro Inglez, the owner of a successful trucking company, has been trying to find the right investment property for about eight months. Now that his fleet of trucks is assigned to professional drivers, he finds himself with enough free time to turn his passion for remodeling into a dream job.
FINDING THE INVESTMENT
Inglez’s biggest roadblock is actually finding and purchasing a property. “I’m having a hard time getting to houses before someone else does,” he says.
By contrast, Paul’s network, built over the course of 14 years as a real estate agent, serves her well. In addition to automatic searches on MLS.com, Paul has several investors who look for properties. Plus, opportunities have been known to literally walk through her door in the form of clients who want to sell but don’t want the hassle of first making their homes ready to show.
“I’m having a hard time getting to houses before someone else does.” – Sandro Inglez, Notice Flipper
Inglez looks for properties through public auctions, but the listings are often out of date. “You’ll have a house listed as going to auction Tuesday at 10 a.m.,” he explains. “By 9 a.m. that day, it’s on hold or it’s off the market. [Houses] could be there, and then they just disappear.”
Inglez has found it difficult to find a single reliable source of information. “My biggest thing is the lack of resources … as far as there’s not one website out there for flippers,” he says. “You just kind of have to hunt and hunt.”
Inglez makes up for this lack of resources through a friend who flips houses in another state. “He just calls up and makes friends with a couple of people in the town,” Inglez says. “I think that’s how the other guys are getting it before me. Just one step ahead. I think it’s a matter of doing your first [flip] and going through the whole procedure.”
“As we speak right now, I’m looking at a very good possible opportunity,” Inglez says. “Hopefully, it’ll go through. If it doesn’t, I’m right back where I started.”
HAVING YOUR FINANCING IN PLACE
Finding the right investment property is only one aspect of the flipping process. You also have to have your funding ready to go.
“Cash is king,” says Paul. “If you can go in and buy a house with cash, that’s ideal. If you don’t have cash, maybe [take out] a home equity line on your current home. If not, I’d look for a hard money lender. [There are] different ways of getting money … than going to a traditional bank or a lender and getting a loan on a foreclosure. Most of the time, you can’t get that financing; everything has to be working. There’s rule after rule.”
“The first problem is the money,” says Inglez. “The way I’m sourcing it out is with some of my own money, my knowledge, my labor — and I have a few friends who are willing to invest.” But it goes beyond the purchase price, Inglez adds. “You have to have the money to purchase the home, and you also have to have the money to fix it.”
Veteran flipper Paul manages this by keeping a tight lid on her finances. She even has a strict timeline in place before she invests. “Every day, I update my spreadsheet,” Paul says. “It’s got to be to the penny. Be on top of it, or you’re going to fail.”
Another way to manage a flipping budget is to plan a quick turnaround. Ideally, Paul wants to own the home for about 60 days, from day of closing to day of closing. “You’ve got money sitting out there, and if you did it properly and you did it quickly, you can be on to the next project,” Paul says. “You’ve got to have the money work for you. And if it’s sitting in a house for six months while you wait for your custom cabinets to be delivered, you’re losing money.”
DECIDING HOW MUCH TO IMPROVE
Deciding how much to do with your new property can be a dilemma. On one hand, your imagination sees what’s possible. On the other hand, most people don’t have Chip and Joanna Gaines offering a discount.
“I’ve done some really big entire home gut jobs,” Paul says. “Those are not my favorite. They take so much longer — so much more time, so much more money. Ideally, if something needs paint, floor, new kitchen, remodeled bathrooms, it’s a no-brainer. If you have to take some closet space to make a bigger bathroom, maybe — but avoid the big undertaking.”
Inglez agrees. “Find a house that needs a quick touch-up,” he says. “No restructuring. Keep everything as-is. Nice paint job; kitchens; bathrooms; flooring; outside; roof, maybe. People … just want something that’s ready to move in.”
KNOWING YOUR CONTRACTORS
Paul says she’s learned a lot about subcontractors over the years.
“It’s a learning curve, for sure. I’m still learning every day.” – Amy Paul, Real Estate Agent and Experienced Flipper
“I’ve definitely made errors, in that I’ve probably gone with the cheapest and not necessarily the best,” she says. “People are going to take advantage and you’ve got to know how to push back. A lot of that comes with experience. It’s a learning curve, for sure. I’m still learning every day.”
According to Paul, you can hire a general contractor to do the work from start to finish, but it’s not as profitable. “You’re never going to make as much money,” she says. “If what you make dwindles, is it really worth it at that point?”
And managing a project oneself can lead to a seemingly never-ending to-do list. “People don’t realize how many different appointments and people need to be involved,” Paul says. “You’ve got to get one thing done before you move on to the next. The other thing I’ve learned is the process and who needs to be in the house when. Do it in the right order or you’re doing it yourself.”
Inglez plans on doing his own work, with a couple of helpers, including a landscaper friend. “I have people together and we should be able to turn and burn quickly,” he says. “I think that’s the key to flipping. I think people get wrapped up in the details and it’s just a few key items a week.”
STAGING FOR THE SALE
Both flippers agree that staging is critical.
“To sell a house that’s been all redone but has all empty rooms, you’re almost shooting yourself in the foot,” Paul says. “When a house is empty, buyers are prone to nitpicking. They’re going to notice every flaw in the paint, every little detail that was overlooked.”
“I like staging and making it look like home when you’re done,” Inglez says. “I’ve done it to my personal home and things of that sort, but I’ve never done it to sell.”
Paul used to stage houses personally until it became a nightmare to store and haul staging materials. “Now I use a stager,” she says. “She comes in when I’m close to being done, I tell her what the end look will be, and she’s amazing.”
“Try to learn with somebody. Maybe you’re really good at the financing side of things and somebody’s really good with the visual. Some of the investors I work with are more on the construction side and some are more of numbers gurus. Find what you’re good at and don’t wear every hat.” -Amy Paul
TWO FLIPPING PHILOSOPHIES
People get into house flipping for different reasons. For Paul, it’s a natural offshoot of her realty experience. She is able to leverage her experience, contacts, and knowledge to flip two to three homes a year.
For Inglez, it’s passion. He loves remodeling, especially older, smaller properties that still have life in them. “I’m excited. I can’t wait for it to happen,” he says. “I tell my wife, `I just love making things beautiful again.’”