Today I’m talking about whether you should start off with flipping commercial; multifamily; A-, B-, C-, or D-class properties. Let’s get started.
Now, you’ve heard me say it before, and I’m going to say it again, money makes money. I don’t want you to forget that. I want you to prove to yourself that you can work hard, stay frugal, and save $50–$100,000. For all of you guys and girls who have saved $50–$100,000, you’re probably wondering what to do next.
Related: 7 Ways TV Flipping Shows Are Completely Fake (As Any Real Investor Knows!)
Where should you invest this money?
You’re looking at all types of properties and there’s a lot of gurus out there pitching their own jibber jabber. You’re soaking up a lot of information, you’re doing your research, you’re watching the videos, and you’ve probably spent six to 12 months (if not longer) on the sidelines thinking about what you should do and how you should do it. But guess what? You guys need to take action. I need you to make an investment. I need you to do something right now.
Sitting on the sidelines will only give you a foundation to learn the fundamentals of how to do certain things; it will never give you life experience. Practice makes perfect. If you invest, even if you end up losing money, you will learn so much more from losing it than spending another six to 12 months or longer reading online forums, watching videos, and attending seminars.
Now, what kind of deal should you do?
I have no freaking clue. This is my belief: when you’re starting your real estate endeavors, the least amount of money you can invest will equal the least amount of risk. So, if that means buying a D-class property in a rough area for a couple grand, so be it. I’m a big believer in taking action, putting your money where your mouth is, and learning from the experience whether it’s good or bad. Learn from the experience. Understand where you went wrong. If you went wrong, make sure you do not repeat those same mistakes. Take what you learned, replicate it, and go into another deal. Just don’t make the same mistakes.
Related: The 7 Commandments of Choosing a Profitable House to Flip
Let’s just say, hypothetically, you’re looking at buying one of these dirt cheap properties. Have the mindset that you’re going to light a match and that money is going to go poof, but that is going to be your learning experience. I’m proud to say that I lost over half a million dollars when I started my journey as a real estate investor. I call it my Harvard degree of real estate. The lessons that I learned from those losses have enabled me to be the real estate investor that I am today. They’ve enabled me to be the entrepreneur that I am today.
I am currently running two companies that are doing millions and millions of dollars in revenue. So when you lose on that D-class property, getting your feet wet and starting your journey in real estate, those losses, and the lessons from those losses, will keep you from repeating mistakes when there are more chips on the table. Think of it that way.
Conclusion
What type of class property you should look at flipping? I personally think you should see what you’re comfortable with. Look at how much money you have saved. See how confident you feel in your ability, and the ability of your surrounding team of networks and then, I say invest the least amount of money. Why? Because that will equate to the least amount of risk. I hope that makes sense. I hope you enjoyed this article and feel free to leave any questions below.
What type of property to you start out flipping?
Let me know below!
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16 Comments
So you didn’t answer the question, or give any advice on how to figure out what type would be good, but you have told newbie investors to just do something and be prepared to lose a lot of money?…
Thanks Gwen but maybe we aren’t reading the same blog.
Maybe watching this video will help get the point across better – https://www.youtube.com/watch?v=wVQ9K33g35M&t=5s
Everyone’s risk tolerance is different.
The sentence below would be my best advice for newbies:
“When you’re starting your real estate endeavors, the least amount of money you can invest will equal the least amount of risk”
I wish you much success
This is an ideological article. I get it – designed to get someone to move off the dime (literally). All real estate investing has multiple components to it (acquisition, rehab, funding, holding costs), but Flipping has the added stress of market timing and speculation – hence the focus on “risk tolerance” in this article.
I agree you just need to find a deal which feels right and take the plunge. You will learn something and it will pay dividends. If you don’t have the risk tolerance (which is also fine), then doing a crowd-funding deal or shadowing a Mentor through one of his/her deals might help you get that confidence.
Thanks Barry and EXACTLY,
Over and over I see investors sitting on the sidelines procrastinating
“Could have, should have and would have” bla bla bla
It’s a joke.
Most folks will live in regret one day.
Nothing beats first hand experience.
So what if you loose a bit of money.
Real estate is a game of making more then you loose.
I loose every day lol
Much success
Oh my. Lost 500,000 in your career start? I’ve got 10k to my name, and losing 500,000 would put me out on the street begging for food! I hope I can learn from your mistakes and not make the same ones. Could save me half a million.
Hoping to start off with a house hack for a duplex, though I’m becoming increasingly convinced that a duplex in a half decent area is non existent or massively expensive.
Gotta pay to live somewhere! Might as well make money off it, if I can at all figure out how to make that happen.
Any advice on finding multifamily properties in safe neighborhoods?
Thanks for your comment Adam,
Don’t be afraid to loose.
As you grow and get bigger, the losses will also increase.
Your role as a business owner/entrepreneur is to minimize risk and maximize profit.
2 weeks ago I was scammed to the tune of $7,000 by a lead generation company.
It’s just the cost of doing business.
We move on quickly from such instances and focus on the good. The growth.
Network with local multifamily investors and immerse yourself in that market would be my best advice for starters.
Much success
This guy is a doer not a thinker. Both have their strengths and weaknesses. People who are doer find success learning to think and thinkers doing what they think. Food for thought from a thinker learning to do.
Thanks for your comment Michael,
Much success
I do BRRRR now but I have flipped. The most profitable flips I have done where the properties I subdivided and developed. The minor land partition makes a great way to profit. One I sold on contract with a balloon the others a simple cash out.
Awesome John,
In the Midwest we don’t really need to subdivide or develop as existing properties can be bought for 20-30 cents on the dollar of build cost.
It’s an investors dream come true here
Much success
Great advice! Thanks
My pleasure Angie
Much success
It’s not always possible to “decide” what you’re going to flip. What makes the decision is which seller is ready to sell to you.
Starting out, we focused on hold properties. However, if we picked up one that needed a bunch of rehab, that became a flip because we never want a lot of our own capital tied up in anything we hold.
Thanks for your post!
Thanks for your comment Karen,
Have a great day
This is great advice!! Thank you for sharing your experiences with us
No worries
Have a great day