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.
@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.
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.
@Shane Boyd You would be shocked how many Realtors don't understand the numbers that go into flipping houses.
It takes a certain stomach to flip. Some people have it, some people don't.
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".
Because they don't have to to get paid well. Realtors could say the same thing about flippers...why do it.
A 1031 makes negotiations REALLY interesting lol...
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.