Updated 17 days ago on . Most recent reply
House flipping as a full time job
I am very interested in flipping to make it my full time income commitment. The only thing I am trying to understand as a beginner is the ways that flippers make money to live. I get the whole 1031 extange to not have to pay any capital gains but how are you guys " living" where is the money to pay your everyday life expenses coming from? Are you just taking the short term capital gains hit and using the rest? Are there other strategies I am missing? Are you using some of the money to buy cash flowing rental properties? Just hoping to get a little bit of guidance before jumping in. Thank you!
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#1 House Hacking Contributor
- Real Estate Agent
- Colorado Springs, CO
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#1 House Hacking Contributor
- Real Estate Agent
- Colorado Springs, CO
Three to four flips a year is roughly what it takes to replace a $100K salary if you're netting $30-40K per deal. That's the math most people don't run before they quit their job.
Full-time flipping is doable, but the people who wash out usually underestimate deal flow. Acquisition is basically a separate full-time job on top of managing renovations. The pipeline has to stay full or everything stalls.
A few things that matter more than most beginners expect:
Holding costs are silent deal killers. $2,500/month in carrying costs on a project that runs 6 months longer than planned eats $15K in profit before you even notice.
Budget your rehab at 115-120% of your estimate. Not because contractors are bad, but because every flip has a surprise.
Keep 6 months of personal living expenses plus a project contingency fund before going full-time. One bad deal shouldn't threaten your own mortgage.
The flippers I see struggling right now bought into thin margins, 8-10% on ARV. The ones doing well are targeting 20%+ equity cushion at acquisition and building in room for the deal to get worse before it gets better.
One exit strategy worth having in your back pocket: if a flip sits longer than expected and you pivot to holding it, VA and FHA loans are assumable by law. Buyers can take over those low rates, which makes assumable listings easier to move in a slower market.
What market are you working in and are you doing this part-time right now?
- Ryan Thomson
