Flipping houses

Not a whole lot of talk on here about this so thought I'd ask - does anyone have experience flipping houses while holding down a full time job? I know my city's (secondary/tertiary market) housing market very well just from growing up/living in the city and working in acquisitions & financing for a developer here. Also have access to good hard money lenders that know me and I'm confident will fund ~80-90% of cost. I'm relatively handy from growing up in a contractor household - can do basic plumbing and hang drywall, but certainly would hire out for most or all of the work. Does anyone here have experience doing flips? What is your typical profit margin , purchase to sale time length per flip, and how do you find deals?

I know there are other sites like bigger pockets for this, but curious about the perspective of other CRE professionals on this type of venture. Long term goal is to buy and hold SFR and MF properties but flipping for now makes more sense.

Real Estate Modeling Course

  • Real-life RE Modeling Tests from actual Interviews
  • Various asset classes including multi-family, commercial and more
  • Huge discount - until more tests and cases added

Comments (27)

Sep 17, 2021 - 9:31am

It is absolutely doable.  Hell it is done all of the time.  The question is opportunity cost.  Will doing this alongside your job decrease job performace to such a degree that you jeapordize your employment?  On the flip side does your job demand so much time and energy that it will degrade the likelihood of success of the investment?  This is the first and most critical question you should ask.

Most Helpful
Sep 17, 2021 - 1:47pm

I would avoid this mindset entirely. If you see a serious opportunity I would recommend chasing it and trying to make it work. This is legitimately how the majority of folks in real estate get started on their own. Even if you only do it once and decide its not right for you (stress/time/etc.), you'll be better for it and know that you scratched the itch.

What I would recommend is (i) genuinely make sure you know what you are getting into (business plan and probability of executing), and (ii) understand what you are / are not risking (not just dollars and cents, but potential loan guarantees, time, and effort).

I have limited experience in flipping given my particular submarket, but my brother and I "manage" the ~10 apartments that our family owns (ie. just property mgmt stuff like finding renters when needed, keeping an eye on cashflow, and lawyer/tax/acct stuff -- not a big deal at all).  We also are the ones that do the most looking for new apartments and actually look into specifics when someone else sees something they think could be a good idea.

Sep 17, 2021 - 2:45pm

The point is that you better be damn sure you can actually manage both.  A medicore performance in two things will rarely beat a stellar performance in one.  That is just reality.  We are at a market plateau at the best and a peak at the worse.  If you don't know what the fuck you are doing just blindly jumping in is a dangerous game to be playing.  

Sep 17, 2021 - 7:43pm

Yea I know a ton of multifamily investors that got started in just flipping houses while working normal 9-5's making like 80-150k/year salaries. Now they are worth millions and work for themselves. There are other side hustles out there, but I think once you get the rock solid lending and deal sourcing relationships, you can't beat small time real estate investing and then scaling it.

Learn More

300+ video lessons across 6 modeling courses taught by elite practitioners at the top investment banks and private equity funds -- Excel Modeling -- Financial Statement Modeling -- M&A Modeling -- LBO Modeling -- DCF and Valuation Modeling -- ALL INCLUDED + 2 Huge Bonuses.

Learn more
  • Associate 1 in RE - Comm
Sep 17, 2021 - 8:46pm

Lame mindset. Would you tell someone who works in real estate to not touch the equity market right now as it is frothy? One can always say the timing isn't right and make excuses not to enter a new venture…

Sep 17, 2021 - 4:17pm

I flipped houses in college. Not sure I would be able to do it while working fulltime. Contractors don't work nights and weekends without a bonus, so you would be in a position where things get done while you can't watch it and that is pretty much always a problem with construction.

Also, unless you plan to do several a year (which is hard enough full time) there are easier ways for you to make an extra 20 or 30k

Sep 20, 2021 - 1:56pm

I think reducing the time commitment by co-investing (through direct ownership) would allow you to ease your way into the strategy, reduce the risk and get exposure to more deals/markets. You might also have enough $ to invest in both turnkey cashflowing properties as well as some flips but ultimately the burden doesn't fall entirely on you and you get access to more resources. 

My biased $.02 

  • Analyst 1 in RE - Comm
Sep 17, 2021 - 8:02pm

Most definitely, although I'd be careful in these inflated markets. My cousin flipped houses as a side hustle to the point where he started doing it full time. Did that for a couple years then started his own residential development firm building luxury houses.

  • Business School in CorpFin
Sep 18, 2021 - 3:57am

I do this as a living.

I make around 2-3 deals per year (not US based).

I exit a few weeks / months after and margin is between 40% to 70%.

It's not a direct path as there is always trouble coming around and nice deals are scarce, that's why I don't do than that but it's more than enough for making a living.

Sep 18, 2021 - 9:01am

curious how many successful flippers here get around the exit costs.  In most markets around me you're paying 5-6% broker commission + 1-2% transfer tax + other misc costs, plus usually short term capital gains tax, which seems to kill a huge chunk of the potential returns.  Are you all licensed and selling them yourselves?

Array
  • 1
Sep 20, 2021 - 3:45pm

My guess is a lot of them don't.

You are much more likely to hear people bragging about their margins, than admitting that they didn't think something through and got eaten alive on the soft costs.  All well and good to "flip" a home in 3 months for a 30% margin... looks less impressive when you have to admit that really it was a 5% margin.

Sep 20, 2021 - 3:58pm

Yeah I often hear stories about friends of friends (non-RE professionals) bragging about buying a house for like $300k, putting in 50k, and selling for $400k - "dude they made like $50k in a couple months!" - and I'm like yeah but didn't that entire margin go to sales costs and taxes????  

Array
  • 1
Sep 19, 2021 - 6:13pm

Flip 7-10 homes a month (we were probably at one point eating up 20%+ of housing stock in our core areas). Here's how we make it work:

1. Cousin manages sites / work being done on homes full-time. He has a few guys he manages as being on so many sites for multiple hours every day has become tough. He gets bonuses based on completion time for each project that trickles down to his guys so incentives are aligned. 

2. Parents take care of the lender relationships, manage the team of minimum wage folks that do the door to door deal sourcing, handle the inbound deal sourcing relationships, any legal, etc. Want them to fully retire in a few years as they semi-retired initially before working on this, so looking to professionalize this slowly or hand off the most annoying parts and let them do the pieces they like. 

3. All I do is provide the capital from the day job, monitor the high-level progress of each active project, make the final say on deal selection (mostly rubber stamp), and model out the returns from each project. Have 60% average margins.

We're just now starting to dip our toes into multi-family having done 1 project this year, but it certainly requires a level of expertise and attention that takes more out of me and is thus less scalable. I really only made it work because I was essentially between jobs not working much. Trying to figure out how to make the move to multi-family so we can get rid of the teams under my cousin and parents and figure out what we need to make multi-family sourcing/improvements work scalably.

Reason being that deals per month is starting to decline as market becomes competitive, margins starting to decline on a per deal basis as others bid against us, and the fixed costs to keep our people around are starting to rise so would love to trim that. Probably naturally offload our single-family operation over the next few years as we scale multi-family. Recognize we need to set up better inbound sourcing channels and probably broaden our market focus to get to the 1 multi-family deal a month we're hoping to get to in the next few years. We also come in for 20-30% stakes in multi-family projects being built by my parent's friends, but looking to take direct charge on our own as those don't show up that often. Don't think we have the capability to be builders ourselves, but if people think otherwise, let us know

Any advice on our situation is welcome from the real estate folks (My background was in banking/PE and just started my second stint as a PortCo exec)

Sep 20, 2021 - 3:52pm

No experience with flipping homes, but have bought some small MF buildings while working full time.

First off, this isn't a business to go into unless you have a directly applicable skill set that allows you to self-perform at least some of the work.  If you contract out every trade, there goes your entire margin.

Second, it's an easy business to get into and there can be attractive profit margins, but it's insanely risky.  Your at the entire mercy of the market, and holding for 15 months instead of 3 can mean the erosion of all your profits.  Forget recession - just a minor seasonal slump can be killer.

Third, and someone mentioned this early, it's not just sale price - (basis + land + hard cost) =  profit.  You pay a ton of money in fees to brokers, to architects, inspectors, etc.  Not saying anyone on this board doesn't realize that, but I feel like home flipping is something that Average Joe thinks is a great business opportunity, and those folks don't have the financial literacy to understand some of this.

I also feel like there is a real reputational risk.  Especially if new to it, there is a real incentive to cut corners and build a shoddy product, especially when it's issues that aren't immediately apparent.  But most folks flipping homes are doing it in a relatively concentrated geographic area, which is also likely where they live - if things in the house you flipped start falling apart the first winter, word will get around.  It's easier to avoid that when hiding behind an LLC or a management company, but it's easy to become a pariah, even if you mean well and the problems aren't deliberately of your making.

Sep 21, 2021 - 11:21am

You can 100% do it... just don't use IRR. The issue with this is just the time constraints involved while working full time. You will have a hard time penciling deals that way. You also don't want your bosses finding out about your side hustle. 

I'm 23. Have flipped 4 houses so far and built enough equity to buy a home in san francisco. The only other thing I would reccomend If you can't source deals. Use two brokers. Anyone you think might be able to find you a deal. You will also come off as a "stand up guy" to them. Always have two contractors to call. And get situated with knowing how the eviction process works. This is what really fucks people over. Also get familiar with taxes. 

I would recommend staying away from bridge lenders as they really fuck you on the returns and only good for certain situations. 

Sep 21, 2021 - 4:22pm

A illum eius recusandae eligendi ipsum eligendi qui. Quam ut porro dolorem cum optio omnis sed.

Iure adipisci esse consectetur quis. Quae quos ea facere qui rem est. Hic sit laboriosam corporis nesciunt esse doloremque et.

Id dignissimos omnis nihil commodi perspiciatis. Adipisci facilis repellat rerum ipsam.

Sep 29, 2021 - 12:15am

Consequuntur praesentium est quidem eveniet soluta esse id veniam. Dolor sunt beatae doloremque ut temporibus excepturi et. Ratione iste hic corrupti voluptatum quo harum. Temporibus at nostrum est harum accusantium facere minus impedit.

Ad sapiente esse magnam et. Est adipisci ut maiores fugiat reprehenderit rerum. Eveniet ut et voluptatem dolore vero. Ut qui rem excepturi assumenda laboriosam deserunt quibusdam.

Start Discussion

Total Avg Compensation

November 2021 Investment Banking

  • Director/MD (10) $853
  • Vice President (40) $360
  • Associates (235) $234
  • 2nd Year Analyst (144) $156
  • 3rd+ Year Analyst (34) $154
  • Intern/Summer Associate (107) $146
  • 1st Year Analyst (514) $136
  • Intern/Summer Analyst (394) $84