Why don't more real estate agents flip houses if it's so good?

49 Replies

I've been a home inspector for 14 years, and I'm just now getting into flipping houses.  I'm a total neophyte, for now.   But I'm curious about something.  If flipping houses is so good and such a lucrative business, why don't more Realtors do it?

I'm in an area where there are about 4,000 Realtors, but only around 300 members of the local REI group.

I couldn't help but wonder why.

I'm curious to hear what you have to say about it.

Thank you in advance.

Cheers!

Shane

@Shane Boyd Flipping houses at first to most portrays a high risk high reward. Most people and agents are afraid to take the risk. Of course, funding flips can be the main challenge as well. Given the overall RE market, we are all seeing more and more flippers. There’s money to be made, just have to fight over deals now!

@Shane Boyd Probably for the same reason you didn't flip during your first 14 years as a home inspector lol! I also find that a large majority of realtors don't like working with investment properties (there are many reason why that is), so they don't necessarily have the skills to pull off a successful flip.  Another reason may be that a lot of realtors are busy faking it until they make it and putting their own cash down on a flip to try to fake it, isn't something most people are willing to do. 

Making 3 or 6% for every house sold seems pretty nice to me...especially in this hot market. In my state, most of the hard work during the home sales process is done by the closing attorney, who makes about $800 per transaction.  What would an agent say if we told them they should make $800 per transaction.  :) 

I have an agent who will occasionally give me a good pre-market deal.  I'm buying one this month.  He said he was going to buy it, but "it just takes too much time and work to flip."  So I assume it's easier to make commissions.

Just my assumption.  

I just assume because they are realtors and not house flippers or interested in house flipping. My realtor now has no interest in house flipping, but likes to help people buy and sell houses. I flip now and will be getting my RE License but mainly to help me with flipping.

Nice!  Good points by all. It's a different kind of work the average Realtor has no interest in, is what I'm gathering.  Good to know.  

I'm approaching my downtown in the inspection industry so I'll have more time to put into my 1st flip.  I don't have high expectations.  I expect to walk away with $5k or more profit for my 1st one.  It'll be fun because my wife and 14 year old son can help with the dirty work.

I'm looking forward to it.  

Thanks for your help.

Cheers!

@Shane Boyd I am also a home inspector in NJ and have been flipping for the past couple years. In my experience dealing with realtors on the home inspection side and realtors in the investment side - I’ve come to realize that a lot of realtors just don’t understand the real estate investing business nor have the know how or resources to successfully flip houses. In my opinion it’s a totally separate business and realtors wouldn’t have any reason to know about investing unless they decide that they want learn it themselves or learn it thru working with other investors.

I originally got my real estate license because I thought I wanted to do flips and thought the license would help. Here in NYC and in some north Jersey cities the in and out transaction costs alone are around 10% of the sales price. That doesn't include renovation costs, holding costs, or profit. You have to find really great deals for the numbers to make sense. There are those that do find great deals and take on all that risk, plus time and energy to do the flip. Me, I discovered I'd rather put in much less time, energy, and risk, and just sell that property for 3-6%.

As for the ratio of Realtors to flippers, the average Realtor I know doesn't know much about real estate investing. They know about selling real estate to owner occupants but would have a hard time explaining cap rates, 1031, IRR, etc. On the flip side there are a ton of successful real estate investors that have no interest in, or would probably not be very good at selling real estate. It's too different jobs.

For my agent, time is money... he'll flip here or there but majority of his time is spent sourcing/selling houses.  There's always deals out there so it's not like you "have" to buy something because it's "too good". 

@Matt K. Once I own a house I like to keep it.... even if it was renovated and could sell well I like the monthly cash flow and knowing I can sell later. Finding and winning awesome deals is the rush for me. I currently work with flippers but I just haven’t been motivated to sell our personal investment properties. Like a two year old says.... ‘mine’ ☺️.

@Shane Boyd

Many realtors have that gift of gab which lends itself to gaining listings and clients and doing a great job of pointing out the pros and cons of a property as a primary residence but don't have the business acumen, delegation skills or straight up "cojones" that flipping takes.  

Your experience in home inspecting seems to lend itself much more to flipping than that of a RE agent in my opinion.  Keep the BP community posted on the progress of your flip!  Best of luck.

We are Realtors and General Contractors and when we can't get the subs we need or they don't show up that means "we" are doing the work.  I can understand why many agents would want to pass on this.  I would probably not do it if we didn't have the GC license and the ability to get contractor pricing.

Most realtors suck at even being a realtor, much less being able to take on the financial and schedule risk of doing a flip or any kind of real estate investing. Not even the 80/20 rule with realtors, more like the 97/3 rule in my experience.

A good realtor, better yet a good realtor that is also a good RE investor, is worth their weight in gold. Find them, then be sure to take good care of them to keep them on your team.

@Shane Boyd Excellent question, I begin my journey as an Investor who soared & failed with the market (2000-2008); saved $ to Invest again and succeeding (2011-present). The failures will make you a lot smarter if you don't repeat the mistakes! Sounds simple right? I became a Realtor in 2015 (Broker in 2018) and had already been in +100 homes as both a retail Buyer and Investor. That includes looking inside crawl spaces, climbing in attics, walking on roofs, showing up to inspections and calling whoever to verify it's a good deal! Those experiences make me an ASSET to home-buyers and sellers, I would not feel qualified had I not put up my resources to invest in Real Estate. Realtors I've spoken to who haven't invested yet say it's for reasons including: not enough money, bad credit, can't risk it all on one deal, need a mentor, not handy, no family nor spousal support, and lack of time. It's unfortunate so many Realtors waste years not cashing in on the financial Power of investing in R.E. I love that I'm mentoring and partnering with an Associate Broker in my Brokerage (O-Luxury Realty, LLC) on his 1st flip this month! Hopefully my response inspires readers to take action! There are definitely rewards for Realtors who strictly aid others like a coach, remember "good" Realtors can still produce a "good" deal for you... that's called an ASSET. @Shane takes most of the guessing out of major repairs, that's a huge ASSET too right? If a Realtor has assessed their ability to SUCCESSFULLY invest in R.E. and won't do it, we know they don't believe they'll succeed.... yet. However, you should learn all you can so you can at least increase your ability to succeed if you decide to invest. If you provide professional R.E. advice to others, please learn all you can because they're trusting you. Think about it, one "accurate" detail about buying a flip or a rental can be advantageous for someone else's deal. Thanks for reading! Orlando
@Shane Boyd Most of them don’t have the knowledge nor experience with business/investments in general. Also a lot of them do not have the work ethic/mindset to tackle this aspect of RE and be successful. It’s not for everyone. I for one dove right into it, and have almost completely moved away from the traditional RE transactions. I just established an LLC in Nevada & California, beginning to do flips for myself now. I have a bunb of investors that I bring deals to. Currently have 4 properties in rehab which I purchased as a buyer’s agent and they will soon be ready for me to list on the market for top dollar. Each property is with a different client. Im getting ready to close my 6th deal in the last 10 months, in the Bay Area. Which is the tuffest market in the country. Most agents can’t even get 1 deal a year out here!
@Bob Floss II Many realtors don't understand the numbers for investors buying and holding either. If they are not investing in real estate the same way you are you may have to send them your requirements so they can better understand how you are analyzing properties.
@Shane Boyd Since you are in 'the biz' I hope you will not be paying full commissions??? To enhance your own home inspection business, I'd propose you approach a Bic from a different firm on each flip, explain you are also an investor and LET the Bic choose a listing agent from her firm for you AND ask for a 1% commission rebate from the bic/listing agent. THE Bic will get to be the hero. That way everyone loves you-- free advertising (the Bic will appreciate the business--- you will probably get 2 listing agents for the price of one as the BIC will insure your property gets top notch service) A $5k return is way too small of a goal!! That can be negotiated away by the buyer in a snap. Take your time in negotiations and teach the buyers agent to help his buyer HOW TO keep the buyers cash in her pocket...offer more SERVICE TO A BUYER instead of price discounting ! Every $1000 of purchase price costs the buyer about $6.00 a month in mortgage payments. Don't trash the comps with your sale! Have a pre-purchase Home Inspection printed out for prospects (use a fellow HI of course). Make it easy for a buyer to buy your house. Have pre-printed mortgage examples (involve a mortgage broker) on display for prospects. Offer a 'free big screen TV with purchase' to the buyer in the listing text. I always found that the more professionals I could involve in any transaction--the more transactions came my way. Its exponential.. So maximize your efforts!