I'm Matt and I am interested in getting into flipping houses but am unsure how to go about it. My wife and I own our home and recently purchased two lower end properties. The first we purchased for cash and did minor rehab to it and turned it into a rental. It has been occupied for 6 months and although the tenant pay slowly we are able to pull the money out of them every month so far. The second property we financed for under 50k and it is read for the market. My original plan was to use these smaller properties to bank roll my first flip but I am afraid it will be yrs before I will see any results this way. Can anybody help me with some ideas to start flipping a house that is low risk? And by low risk I mean I don't really like the idea of borrowing 100k+ and be on the hook for a quick flip. Is there another way to get started that does not involve going into large amounts of debt? I will have $1,200 positive cash flow per month after paying the mortgage on the second property every month, assuming both tenants pay on time in full every month. Should I use this money as originally planed to pay the second rental off in the next 2yrs and try to stay on the debt free path to flipping, or should I use this cash flow to save for a down payment for a third property to flip and if so, How? Any positive feedback would be appreciated and I welcome success stories on how you started with your first flip.
@Matt Paris welcome to BP.
how do I start flipping houses?
That is a very big and very general question. That makes it tough to answer.
The fact is real Estate investing especially flipping houses is risky. There are two ways you reduce your risk.
- Know the business, the more you know about Real Estate the lower your risk. Things like knowing how to evaluate deals knowing your market, knowing the hidden costs of real estate, etc. reduce your risk.
- Do great deals. The less you pay for a given property the lower the risk. If you buy a property with an after repair value (ARV) of $200K for $80K that is less risky then paying $100K for the same property.
Unless you have a large sum of cash or a significant line of credit, there really isn't a good way to flip without going into debt. You at least have to purchase the property you want to rehab. You could take out a line of credit against the first house you bought, but it sounds like it wont be enough. I recommend speaking to a local community bank. Many local banks will lend you the money to purchase and rehab, up to 75-80% of the post rehab appraised value. Also, taking on an equity partner is always an option, but those are difficult to secure and, of course, you have to share the profit.
Hope this helps.