First-Time Flippers: What’s the Biggest Unknown for You?

Question

Is it the rehab budget, the financing process, or what happens when the project is finished and you’re ready to sell?

Andy Sabisch · Answer

Speaking from when we started, finding how to scale financing without doing 20%+ on each property

Andy Sabisch · Answer

The thing is the process to buy, renovate and sell is not that complicated although the Internet gurus will make it seem mystical to most and sell their services to navigate through the wickets.  Then there are those that watch a dozen YouTube videos and are ready to become instant real estate moguls.

Both find the pitfalls and unfortunately many are expensive ones that turn people off from the start.

Understanding the market you will be investing in is key and many are doing remote flips in areas they have never set foot in.  They look for cheap properties compared to their home area and think they have found a hidden goldmine when in reality, experienced flippers are doing their thing across the country.  So thinking you have stumbled across an untapped cheap market is a fallacy.  We invest in areas that without knowing the areas you can be in a war zone or a great area in the matter of a dozen blocks - investing remotely will never get you that intel.

Another pitfall is the reno budget (under estimate), the time line and carrying costs (under estimate) and the ARV (usually over inflated).  A wrong call on any of these three can drown a project from the start.  There have been stories here of newbies that could not sell in the window they thought at the price they needed to cover their investment.  We have bought properties from these investors with supplies in place that simply ran out of time and money.  Always expect a project to run into issues, cost more than expected and sell for less than expected and you will make money.

The biggest advice I would give first time flippers is try and get with a seasoned flipper in your area and see how the process works . . . buy a few lunches and roll up your sleeves if possible and it will be a cheap education that will save you a fortune in the long run.

It is easy once you get the machine moving but making sure you do not find yourself with the machine in flames at the start is key.