Three Strategies to Reduce Your Financial Risk When Flipping Houses
By Tarek El Moussa
As you know from watching Flip or Flop, Christina and I got into flipping houses after the housing bubble burst in 2008. Basically, we had to do something different to provide for our family, and as realtors, we had the background and knowledge to get into real estate investing. In other words, we had to quit our jobs and get into flipping. For us, it was either fix and flip or flop and sink.
You could say we’re experts in jumping in with both feet, but we definitely made some mistakes that I wouldn’t want to do over again. Fortunately, you can learn from our mistakes if you follow these steps as you shift from the 9-to-5 world into the world of real estate investing.
Get Ready to Be Your Own Boss
First of all, if you’re going to quit your job to become a real estate investor, you need to know that flipping houses can be a full-time job. Furthermore, when you start your real estate business, you’re going to be the boss. You’ll be in charge of keeping yourself motivated, finding flips, going to auctions, making offers, bidding, finding contractors, getting rehabs done, and everything else involved with buying, fixing, and flipping your properties.
Being your own boss sounds great on paper, and it’s great in real life, too. However, you can’t give yourself the afternoon off every day and expect to do well. So, before you do anything else, as you learn about the real estate business and how to get started, prepare yourself to be the boss. Are you ready to get self-motivated and keep your business on track?
Network with Investors and Lenders
You don’t have to have a lot of money saved up to start flipping. You do, however, need a means to get your hands on that money when it’s time to buy. Network with family, friends, and coworkers who invest in real estate. Get to know investors and private lenders who work in your area. Research hard money lenders. In other words, find out how you’re going to fund your first flip.
Make Your First Flip
Once you know where the money’s coming from, you’re almost ready to start flipping houses. With some research online and out in the real world, you’ll be ready to make your first flip. Don’t rush your first purchase; be sure that you’ve gotten a good deal on a house in a growing neighborhood where you’ll be able to fix and flip it quickly.
When you find the right property, buy it and get to work. You may not be able to quit your job before completing your first flip, so be prepared to visit the work site in the mornings, evenings, and on weekends. Keep your phone on you at all times when your contractors are working, and be ready to respond to challenges as they arise.
Flipping a house while you have a full-time job isn’t easy, but it can be done. In fact, for a lot of flippers, it’s the only way to complete their first flip. So stick through this one and know that it gets better.
Quit Your Job and Keep Going!
After you fix and flip your first property, you should have enough money to live on for a while. You’ll have your investor or hard money lender paid off, so you can do another deal with them when you find it or use your earnings to buy your next flip. After just one or two flips, you should be able to quit your job and make flipping houses your new career. Real estate investing is still a full-time job, but if you ask me, it’s a lot more fun than going to the office every day!
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