Thread: Nineteen and want to flip a house (No credit, yet)

I admire your ambition, but the risk will probably outweigh the reward. Even if you get a lender to loan you the money, you still have to find a great deal (tough with cash investors lurking everywhere,) get all the work done within budget, get it done quickly to avoid too many loan/mtg payments, have money for unforeseen things in the house, etc. Not to mention that when you go to sell it, you'll have to pay broker commissions, possible closing costs for the buyer, taxes, etc.

Cash is king in the flipping business.

Where do you currently live? Are you in a position to buy a house you could live in while doing repairs/upgrades?

Start off learning the industry. You can be a runner/bird dog for investors, bring them deals and you get a finders fee. Make the connections in the industry and area you want to concentrate on and build your network. Study the market and gain as much knowledge as possible. Understand people's taste, what sells, what doesnt, the costs of construction, the financing costs. There's a lot of financial background you need to know to make the numbers work. And yes, in the end you really do need cash, could be a group you start, gather 5 investors pitching in 10k each and promise them a return at 10% a year or split it equally 6 ways as you will be doing the work and if they agree, viola.

Originally Posted by hay484

Start off learning the industry. You can be a runner/bird dog for investors, bring them deals and you get a finders fee. Make the connections in the industry and area you want to concentrate on and build your network. Study the market and gain as much knowledge as possible. Understand people's taste, what sells, what doesnt, the costs of construction, the financing costs. There's a lot of financial background you need to know to make the numbers work. And yes, in the end you really do need cash, could be a group you start, gather 5 investors pitching in 10k each and promise them a return at 10% a year or split it equally 6 ways as you will be doing the work and if they agree, viola.

I agree. Flipping houses is not like how HGTV makes it look. It requires a lot more knowledge than crunching numbers. More importantly, you need an "eye" for it. Get a job with a contractor (ie. your father or one of his collegues), make connections, learn the business, find mortgage brokers, find insurance brokers, find tradesmen, find realtors (your neighbor might not be your best partner), find like-minded people, find buyers, find sellers, find property managers,...you get the idea. Make friends who you might help out now with some time and labor and they will help you out a few years down the road when you need it. I think your knowledge in the field is more important than the money you need to gather to make this project happen. Don't fall into the term "flipping houses", people use that term way too loosely now that people don't understand the risks involved and don't understand how to really "flip" it.

"Flipping" houses has certainly worked well for some people, but I would recommend looking into rental properties. Not sure how your local market is, but it's generally not hard to find properties (single family & multi) that generate a positive monthly cash-flow. The best part of rentals is that after you have collected several you have a steady, relatively passive income coming in every single month. Besides the cash-flow your tenants are steadily creating more and more equity for you. There also a LOT of tax advantages

I agree with what was stated above.

I'm almost 22 and have been in the real estate industry for four years. At the moment, ESPECIALLY for someone with no experience, flipping a home will likely turn into a disaster. In this market, a successful flip will take a lot of patience and expertise.

My recommendation is to first learn the market. Get your real estate license and a good mentor. Begin learning as much as you can and saving every dime you make. For someone without credit, it'll be nearly impossible to get a loan without a strong co-signer. Assuming you can get one, the best advice I can give you would be to purchase a distressed home significantly under market value - preferably one that needs work. Remember, you want to save and cut costs at every opportunity available, and buying a fixer will save you a fair amount. A trustworthy and honest crew who can help repair/upgrade a home is worth its weight in gold. From there, you'll be owning a home approximately 10-20% under market value - again, in this market, not quite enough to flip with enough profit. However, this a gem for tenants. Rent the home out to solid tenants, sit back, and enjoy steady income. When the time is right, you can pull money out of the home to buy another.

Hope this helps.

Graham

Save up the money. Wait a couple years to see if the housing market has improved. Then look at flipping. I'm looking into buying a rental property. If I get a good deal on a messy house I may think of flipping it and renting it but I'm not comfortable with the current market. I'm going to keep looking and see how the market is moving. In a year to 2 I may pull the trigger. I'm saving up right now.

Their is a guy form the show flip this house who wrote a book that is pretty much a hand guide to becoming a flipper he does 25-30 houses a month

Originally Posted by saintz

This is not a good economy to be trying to flip houses. They are likely to sit. And everyone wants a deal, so after you fix up a dump, people still want it at the original dump price. I know real estate agents and their clients with this problem right now.

The people who start in your position and become successful generally view it as temporary housing, not an investment. Find something you can live in while you fix it. Get a roommate (like a college kid who doesn't mind living in a dump under construction) to offset some of the costs. This way it's not a money pit, it's a residence which has the potential to make you money, but at least is a roof over your head. Once it's nice, either sell it or rent it out and move on to another project. You'll have better luck renting (people have to live) than selling (there's tons of inventory on the market and houses are not selling). Also, this is a cash market. Banks don't want to lend, especially on an investment property. This makes it hard on you and the person you're hoping to buy it after you refurb it.

Doing a lease-option would solve his problems greatly wouldn't it?.. rent it out, then seller finance when the owner saves up a down payment?

seems like a win/win no matter the outcome. Either rent it for positive cash flow, or sell it to the renter. If you have to evict or foreclose, hopefully it wont be that costly and you do it all over again.

We attempted a flip in 07-08 (dont remember the exact year) As you might have guessed, it turned out horrible and we lost big on it. Unless you can do a lot of the work yourself or have friends/family that can help and wont demand market rates, you're wasting time and money.

Contractors have multiple jobs (or at least they did at the time) so your project is only a fraction of their overall income, so they really don't care too much if they're not there on time everyday. Also, unless you know how to do this stuff, then how do you know what to look for if contractors don't do a good job (may not always be cosmetic), also job-costing is a big one too.

.. We didn't know any of that stuff.

Having good credit to cheap money is essential. We had a line of credit with a bank and just tapped that shit like a keg when we needed to cut a check. But as the saying goes, "A fool and his money are soon parted" .