8 Reasons Why You Shouldn’t Believe The Hype About Flipping Houses

11

I’m not old school rappin’ here….

Like Chuck D and Flavor Flav say in their 1988 anthem, some of the things you hear about house flipping may not be true.

There’s just so much hype…so don’t believe it.

Real estate investing and house flipping in particular, is a field of business where you can earn large amounts of cash. Many people don’t believe it though.

That is not “the hype” btw!

Nearly universally, owning real estate is a recognized means of earning and accumulating wealth – more wealth has been created through real estate than any other means. It’s one of the top 6 industries to make money.

So why are so many people still so skeptical about real estate investing as a means to wealth?

It’s probably the hype…

Now that nearly everyone turns to Google for information, you are likely to run into some bogus myths about the business – as well as lots and lots of hype. The bottom line is that it actually takes HARD WORK and experience – as well as time to perfect it.

Most of the myths about real estate that we come across are fabricated by the public or the media but hardly by the real estate investors. To avoid getting discouraged by these myths, you must first separate the truth from the hype.

Related: Don’t Fall For the Hype: How to REALLY Discern a Good Deal

So let’s take a page out of Public Enemy’s late 80’s rap anthem and separate out the real deal from the hype here.

8 Common “Facts” About Real Estate Investing

The following are 8 “facts” about real estate that hinder people from taking action. If you can see them for what they are (bold-face lies) you’ll be freed up to truly become successful. So let’s get into it!

1. You Need To Be Filthy Rich To Make It In This Business…And Lots of Cash

Many people think that real estate investing is only reserved for people who have made it to the Forbes’ list or at least have a substantial amount of money in their bank account.

What they do not know is that you can actually flip houses with no money; it’s all a matter of using other people’s money.

Some investors choose to take out traditional loans to fund their flips. If everything works out, you can go from using other people’s money or taking out loans to using your own money as you establish yourself.

IF you have money, great. You can certainly use it. But most people don’t.

Funny thing is that now we actually have money…but we STILL don’t use it because we flip houses with none of our own money. Read these case studies on how it’s actually done.

2. People With Bad Credit Do Not Get Funding

The traditional way of getting a loan is approaching a bank.

Unfortunately, if you have a damaged credit score, getting a loan won’t be easy. If you don’t have a track record of success flipping, not good there either.

The good news is that there are many other ways that you can get funding for your house flip even with bad credit.

For instance, you can go to a private investor. A private investor in this case could be a wealthy uncle or any other family member, a co-worker or a friend. They just need to have good money they are willing to invest.

I actually got $230,000 from my Internet Marketing guy…I had no idea. He funded a flip we just put on the market last week.

Who would have known that he had any money??

A partnership is also another way of getting funding. Many flippers who have no money and no credit make their partnership offers more enticing by offering to do all the work and splitting the profits 50-50.

If none of the above work, consider getting a loan from a hard money lender. A hard money lender will not consider your credit score but they will charge you percentage points on top of the interest.

3. Investing In Real Estate Is A Risky Affair

Real estate comes with certain risks no doubt…but thankfully, there are many ways that you can minimize if not avoid the risks.

Wholesaling is a great way of minimizing risk and it’s a fairly safe approach for beginners.

When done correctly, wholesaling would make an ideal strategy for beginners to flip houses without investing their own money or borrowing it.

Regardless of the method that you choose to invest in real estate, ensure you have done a great deal of research before finalizing any purchase. If you don’t think that real estate is risky…look at the returns on your stock market investments for the past 10 years.

4. Only Contractors Can Flip Houses

No, no and no.

You do not need to become a contractor in order to flip houses. Although the experience can help you save some money, it is NOT NECESSARY.

The reason why investors hire a team of contractors to undertake rehab projects is because it is less stressful than doing it alone. And if you’re not a pro, you will make more money hiring a good contractor than doing it on your own.

Just make sure you ask these 14 important questions.

Yes, it seems more expensive to hire a contractor,  but it takes a much shorter time to rehab a house when a team of contractors is doing it. Contractors also hire other people to help them out with certain renovations because they do not have experience in everything.

And the quicker you can sell, then the better your profits.

Related: Working “On” Your Real Estate Business vs. “In” Your Real Estate Business

5. You Should Always Sell Immediately

Like we said above, the faster you are able to sell property, the more profits you are likely to make. This is because you will spend less on maintenance, utilities, taxes, insurance and any other expenditure that is required of you.

Given the above fact, it’s no wonder that many house flippers are under the impression that you have to sell as soon as possible. While it might be nice to sell as quickly as you can, you do not have to. You can try the buy and hold approach.

There are two ways you can do this: you can rehab and rent out the house for a monthly profit or you can hold the property until it appreciates and sell it for more money.

6. Spring Is The Best Time To Close Deals

“You should probably wait until the Spring”

So they say…

Yes, the Spring and Fall are good times to flip houses but not necessary.

Many investors prefer to sell their property during this time because that is when families are reorganizing and school is letting out – so naturally the demand is higher than the supply.

If we were still living in the fifties this would probably be a good approach – but since we live in contemporary America, it may no longer be applicable.

Many of today’s buyers are families, but there are many buyers who do not have families. And they are buying houses too. Don’t delay and use this excuse, just buy right, use the 70% Rule and sell fast. Don’t wait til’ Spring.

7. You Can Join The Millionaires’ Club Overnight

I WISH!

Many “gurus” will let you in on a few “secret” tricks that will help you get rich overnight, only if you buy their book, course or whatever.

If you’ve been a reader of this blog for any time whatsoever, you probably know there is no such thing as getting rich overnight.

You have to work hard and keep your eye on the ball in order to become successful. So if you were hoping to buy your own island after your first flip….you might want to snap out of it.

8. You Will Find The Perfect House To Flip If You look Hard Enough

Sorry to disappoint you but there is no such thing as a perfect house.

They ALL have flaws…especially if you are in the business of buying, renovating and flipping, like we do.

In fact, the more flaws…THE BETTER.

Trash is cash and mold is gold.

The more dilapidated the house is, the more money you could potentially make, even if the house has structural issues. Point those issues out, get a good price when you buy, then fix them all and turn that trash heap into a beautiful home some lucky person will enjoy living in for years.

If you have come this far, please leave a comment below. I’d love to know what you think of these house flipping “hype”…or any other of your favorite old school rap tunes.

Subscribe to our mailing list

* indicates required Email Address * First Name Last Name
Share.

About Author

Michael LaCava is a full time real estate investor, house flipping coach and the President of Hold Em Realty located in Wareham, MA. He runs the website House Flipping School to teach new real estate investors how to flip houses and is the author of "How to Flip a House in 5 Simple Steps".

11 Comments

  1. Michael,

    You make some very good points and I think things have changed over the last decade.

    My wife and I made a lot of money flipping (wholesaling) and fix and flipping houses a few years back

    Recently we re-entered the market in the Miami area and have discovered that there are a zillion “Wholesalers” that send out undreds of computer generated Internet Offers each week and eventually snag a deal here and there. This sounds great because for a fix and flipper like me it would seem that I have access to a plethora of “hot” deals. Unfortunately quite the opposite is true. These Wholesalers place their selling price about 15% – 20% below ARV so if you subtract repair costs, holding costs and real estate commissions paid for access to the MLS, voila, your profits evaporate.

    In the old days, when I was a Wholesaler, if I paid $50,000 for the house I would sell it the same day for $55,000. And after $15,000 in repairs, my Buyer might dump it for $85,000 and earn a handsome profit. And naturally he/she would be knocking on my door for the next good deal. Now I see Wholesalers hanging onto property for months and discounting them several times during the process thus creating “doubt” for a would be fix and flip buyer.

    Many of the Wholesalers today are either ignorant about the ultimate selling prices or they are incredibly greedy, or both.

    I have also noticed that many of the properties are residences converted into rental units and done so “illegally”. The Wholesaler’s mantra has become, “Hey, don’t sweat it, it isn’t a big deal”. Maybe not for the Wholesaler but it can stop my Buyer dead in his/her tracks.

    • That is true Tom and every market has different demand. I have heard that in your area. I think most of the wholesalers just don’t get the numbers right and therefore need more help evaluation for their sake and the investor. I find the same thing here and often have to educate them on what the 70% formula is.

  2. Stephanie Maser on

    Your article gets me excited for this new adventure in life. I have always (for about 15 years) wanted to flip property and become a real estate investor. Even with the crash, I personally know some many people that have real estate investement that were not shaken. After being laid off from my safe and secure medical field job I am now persuing my dream, I have returned to school, getting a degree in real estate. Working in becoming educated and having a greater understanding of the real estate field, this way have some backing to show potential investors. This article is full of great information that I can show to those investors.

    Thanks!

    • Thanks Stephanie. You sure have come to the best site out there. Josh, Brandon and the BP team has done an incredible job bringing you the best education out there. Read all my blogs and the other contributors and get on the Forums. You just can’t beat it!!!

      • No not really.
        Just put it in since
        a) Went with the Public Enemy theme
        b) The overall point of the song is to say the truth and call out others for not, popular or not, i.e. not just the hype in this case.
        c) It is just awesome! :)

Leave A Reply

css.php