Best advice (for a novice) when starting out flipping houses? SF Bay Area
Walnut Creek, CA · Member since 2015 · 4 posts · 1 vote
I am interested in any and all advice for a novice like myself (and for other newbies out there!). I am working on researching real estate info and and am starting to join groups to network, network, network! It's exciting to be diving into a new field, but it is also terrifying...I'm sure many of you can relate. I am currently a Social Worker, so this switch would be quite the change-but I've been really interested in this for a very long time now, plus my husband and I are about to move from the Tahoe area to the Bay Area and it seems there is a huge market for house flipping in the Bay Area. I'm ready to explore this in depth and start moving forward, so any thoughts are appreciated!
P.S. Can someone "assure" me that this field isn't completely insane to get involved with?! ;)
-Colleen
The most important thing beyond constant learning is patience. Too many newbies get frustrated and purchase a "problem" that looked like a real deal because they just wanted to get their feet wet and make some big money. They were concerned they were being left behind because they couldn't find a property after 6 months.
I only know a few markets well but I can tell you that when you start reading about real estate daily in the paper it is time to start being very careful. I watch stats on a daily basis and here in Sonoma county I can tell you that the ratio of price decreases of listings to price increases is about 10 to 1. Meaning that on a daily basis 10 listings have had to drop their price to every 1 that has increased their price. That is very reminiscent to 2006-07. The paper was just trumpeting that median prices have hit the same level as 2006 and that houses are selling as fast as they are listed. While that is true it is the "small number" of sales that is pulling the price up. There is not enough inventory for the demand. That demand is from a small number of people however. Daily new listings is about 15 in Sonoma County so inventory is just a bit below demand.
While I am not trying to discourage you I caution you to be very thoughtful of your purchases and have verrrry deep pockets if you need to hold it for a while to get the money you have in it back with a profit.
A Sonoma county daily gave stats from the recorders office indicating that of the 67 homes purchased and flipped in late 2007 that none of the homes held less than a year made ANY money. All were losers and they weren't even adding in the cost to repair.
Don't buy unless you know your resale market, know your stats on current sales and make sure you are buying using the formulas found here on BP if you are planning on flipping.
Good luck, SF is a great place to live and own property.
Welcome to BP and real estate! I think real estate is the best business out there, whether you're flipping, land lording or working on the financing side of things it is just an exciting business with endless possibilities. I don't think you're crazy for wanting to get into real estate.
My biggest advice is to never stop educating yourself, learn as much as you can, but most importantly don't be scared of pulling the trigger. I think the biggest reason most people fail in real estate is because they never get started! It is very easy to get wrapped up in learning and analyzing yourself to death. At some point you need to jump in!!
Good luck!
This field is insane to get in to. The only people who make it, long-term, have more than a few screws loose and a completely broken risk-o-meter.
Best advice: Hire an accountant on your first flip. Incorporate correctly (Hire a lawyer if you don't know how). Hire reputable contractors out the gate.
Do not trust anyone who makes money when (or because) you buy or sell the house. Get third party opinions from people who have nothing to do with the deal.
Welcome Colleen. We are pretty new in the business of RE investing as well but do have one single family home rental property. I like and agree with Daniel's advise as I've done a lot of research myself over the last 6 months on investing, and this was after we purchased our rental property.
My input would be do be hyped by all the expensive trainings out there although I did attend FlipAdvantage training (Tarak and Christina El Mousa) and learned a lot, but the coaches there looked at our situation and asked "why did you come to this training, seems like you have a plan and the funding to move forward?". So we didn't attend their $20K Vegas training. We found Bigger Pockets right after that training and love the training and forums. Real people giving real input and advise.
Also, make sure you have a good funding source and cash to work with, although you can work this business with very little cash, but it's much more work and requires more creativity in securing and financing properties. We are using a HELOC since our house is paid for to tap into our equity.
We are looking into house flipping right now in the Dallas area (where I've lived all my life). Love San Fran. Great city. Spend many business trips there and Petaluma (Sonoma County). Blessings on your business.
Hi @Colleen Hendrickson, welcome aboard. I like how you jumped in both introducing yourself and with an interesting question. I used to work for Big Brothers Big Sisters in SF and then another social service agency here in Ukiah. You are doing great work for people, but it so undervalued and underpaid in our society that it can get frustrating. I've decided that REI can be wealth and freedom building strategy that will allow me to dedicate my time where I choose without worrying as much about how to pay the bills each month.
So far I've just done rehab and hold, but I'm looking to do some flips as well. I really enjoy the process of taking an old run down place and turning it into something great.
I'm based a couple hours north of San Francisco where the barrier to entry is a lot lower. We just closed on a two house property on a beautiful acre 5 minutes from a nice beach for 200k! Getting started on the rehab now.
Anyhow, good luck with your next steps. Lots of great networking opportunities in the greater bay area. Lots of active folks here on BP to connect with.
Cheers.
Hi @Orion Walker,
What are the odds-I work for Big Brothers Big Sisters of Northern Nevada! I have worked for two other agencies prior to this location as well, so I'm feeling the need for a change. How funny! I'd love to connect sometime if you're ever in the area (I'm of course I'm not living in SF quite yet, but most likely will be in a couple of months).
Great to hear from a person who was in a similar place as myself. :) Thanks!
Colleen
The most important thing beyond constant learning is patience. Too many newbies get frustrated and purchase a "problem" that looked like a real deal because they just wanted to get their feet wet and make some big money. They were concerned they were being left behind because they couldn't find a property after 6 months.
I only know a few markets well but I can tell you that when you start reading about real estate daily in the paper it is time to start being very careful. I watch stats on a daily basis and here in Sonoma county I can tell you that the ratio of price decreases of listings to price increases is about 10 to 1. Meaning that on a daily basis 10 listings have had to drop their price to every 1 that has increased their price. That is very reminiscent to 2006-07. The paper was just trumpeting that median prices have hit the same level as 2006 and that houses are selling as fast as they are listed. While that is true it is the "small number" of sales that is pulling the price up. There is not enough inventory for the demand. That demand is from a small number of people however. Daily new listings is about 15 in Sonoma County so inventory is just a bit below demand.
While I am not trying to discourage you I caution you to be very thoughtful of your purchases and have verrrry deep pockets if you need to hold it for a while to get the money you have in it back with a profit.
A Sonoma county daily gave stats from the recorders office indicating that of the 67 homes purchased and flipped in late 2007 that none of the homes held less than a year made ANY money. All were losers and they weren't even adding in the cost to repair.
Don't buy unless you know your resale market, know your stats on current sales and make sure you are buying using the formulas found here on BP if you are planning on flipping.
Good luck, SF is a great place to live and own property.
Hi Colleen and Welcome!
Yes, there is big money to made on flips in the Bay Area, so you are not insane! Recent stats showed $194k was the average return...That's not too shabby. And there are always opportunities, in every market. You and your hubby will just need to be ready to strike.
Due to the lack of inventory, high demand and potential for significant ROI, the competition is tough. Cash is king, but luckily there are many private lenders looking to partner. Smart money is on areas that haven't popped yet, and they do exist. Lots of places under $500 sq ft, right in San Francisco.
All the best!
Susan Truax