The Truth about Flipping television shows
Everybody loves a Nice Cinderella story. It draws you in, this ugly run down home that seems like it's better days are way behind it. Maybe it reminds you of your home, the home you grew up in, or just something you have seen driving by. It may have historically good bones that makes you wish it were taken care of better, or maybe it was the ugliest design ever and nobody has ever really liked it. The transformation, either back to its former glory, or from something it is to something it never knew it could be is amazing. It is no wonder we love these shows. They have really taken off, and have also caused a ton of people to start getting into this line of work as well.
Whenever we see a show that is focused on "Flipping" my wife inevitably says something along the lines of, 'They never show what it is really like'. Being someone in this line of work, we can honestly say that they leave a lot out to make it more consumable. Does it dramatically change the overall output, not at all, but it definitely makes it seem easier than it is.
Thinking of getting into "Flipping" houses? Goal Setting is important in that process. Here are some Topics that will help paint a more realistic picture:
- There is a very high amount of competition for properties. You will feel like everyone is doing it. This has become very popular as I had mentioned largely from the Hollywood version seen on television.
- Keep in mind that costs have gone up. This can be labor costs, or it can be material costs (Natural disasters have an impact on this area).
- The average flip takes 184 days. Plan to have carrying costs.
- Buying at the right price is critical
- Setting and sticking to an accurate budget is important
- Location, Location, Location! I will just leave that here.
School is in session:
Not everyone who get's into flipping comes out making money. It is said frequently that many or most first time flips lose money. It is said to be like paying for your education. There is no quick way to be an experienced and knowledgeable veteran. The best bet is to build a team around you that can supplement your skill set. If you are very handy, but don't know the market, you would need an Agent who does. If you don't know anything about doing the work, you will obviously need a contractor and crew who will do it right and at a good price. Be forewarned, some contractors or subcontractors may take a payment and not complete the work. You need to do your research on everyone on the team.
How much did you make???
So, you sold your first flip and made a lot of money! First off congrats! I am going to assume that you kept track of all of your expenses and mileage, know what you are doing with your tax guy, and all of that. The piece I want to know is this, would you do it again? What I mean by that is, when you see your net that you earned after everything, how many hours did you put in and what did it break down to roughly? My hope is that the answer is, YES! For some houses, you will make money, but you will think, well I am never going to make that mistake again. We pay for education on every flip.
Financing is Expensive
Unlike your personal property where you may secure a loan with a rate almost anywhere that is affordable and something that you are very used to hearing about being under 5.5% percent for so long. There is a much higher rate than what you are used to seeing here for investments. You will hear about Hard Money lenders, and commercial lenders, that will suggest rates of 7 to 15%. Ouch! Another key piece is that you will be hard pressed to find traditional lenders who want to loan to you. This is even harder to get a loan on than a vacation property. They make their money over time, and you are trying to do this in as little time as possible. It will not net them much, so they don't want to do it. Remember whatever rate you pick is likely going to be with you for about 6 months. Some people end up going with a HELOC- a home equity line of credit against your personal primary residence. This is much more affordable, and that is the attractiveness, just remember that this is where you lay your head at night. BE ON YOUR GAME.
The Recipe must be followed for success
Do not skew from the plan about your budget. That will be something you regret inevitably. Make sure that you are not forcing a house to fit into your criteria because you are desperate to buy. If it is too expensive, in the wrong location, or just too many repairs are needed, it is not going to change once you buy it. The most important thing that I can say is, have a great support team around you on this. They will make or break the process for you. Your success in this, just like in life is largely determined by who you surround yourself with.
Good Luck! Let me know if you have questions, or would like to discuss anything in the Real Estate realm
I would love to give you some assistance. If you are selling on your own, want to list, buy, become an investor, become an agent, or just have Real Estate questions let me know. I have past experience in Hillsdale County, Lenawee County, Jackson County, Ingham County, and really enjoy Napoleon, Grass Lake, Michigan Center, Jerome, Brooklyn, Cement City, Somerset, Addison, Jackson, and the other surrounding Michigan areas.
Korey Rowlson
Realtor® EXIT Realty 1ST
740 Laurence Ave
Jackson, MI 49202
517.414.1230
Korey@ExitJackson.com
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"I am a Realtor® and have been redeveloping residential homes in Jackson, and Hillsdale Counties here in Michigan since 2012. I enjoy all aspects of Real Estate, and strive to be the best Real Estate agent in Jackson, Michigan".
