When I first started flipping homes in the Seattle area, competition was scarce. If I targeted a few properties to bid on at auction, I knew I was buying one of them. Well, things have changed. Thanks to all the HGTV shows and so-called real estate “gurus” out there, many Boeing, Amazon, and Microsoft employees, etc. are trying to get into house-flipping as a “side hustle.” They believe in the promise of making six figures by only working 20 extra hours a week.
The problem is, as stated in a recent Seattle Times article interviewing flipper Joshua Levitt, reality doesn’t match reality TV. HGTV has turned flipping houses into a spectator sport. What these shows don’t tell you is it’s not all glamorous or sexy. It’s not a part-time gig or a side hustle. It’s a legitimate business strategy.
Even a loss can be viewed as a win if there was a learning experience involved, but the right preparation can minimize the loss.
Real-estate gurus’ seminars promise easy money but leave out the gritty details. This leads to unprepared would-be house-flippers losing money on their first deal. Even a loss can be viewed as a win if there was a learning experience involved, but the right preparation can minimize the loss. At Caliber, most first-timers show up at our Investor Meetups, which are fun, educational, and inspiring. They quickly become regular attendees and eventually dip their toes by submitting conservative bids on homes up for auction. Weeks begin to pass without an acquisition and their bidding strategy grows increasingly more aggressive. Then, the week arrives when they win a property and it’s real. But if, as can happen, something goes wrong, they start to panic and want out.
If you’re going to flip houses, first ask yourself one important question:
Do you have what it takes?
Only you can answer this question, but you need to ask it. It’s a real gut-check moment, the first of many you’ll have if you go down the path of turning hoarder homes into beautiful properties for working families. What do you do when you encounter something that’s not in the seminar or the reality show? How will you handle the setback? Notice I say setback, not disaster. That’s deliberate. If something goes wrong, you need to see it as a temporary setback, not a disaster. You must cultivate a big-picture mindset and play the long game.
I can still remember my second flip. We purchased the property at auction, arrived bright-eyed and bushy-tailed to find the basement completely flooded. I’m talking four feet of standing water! Next weekend, we had thieves break into the house and steal the copper wire and pipes. The following weekend the appliances went missing. We ended up hiring someone to actually sleep in the house until the project was finished! Every incident would absolutely ruin my weekend. All that stress and anxiety was more than I was prepared for.
Another property we purchased resulted in some very disgruntled former homeowners who continued to visit our acquisition and vandalize it. They sprinkled grass killer on the new sod that read “F*$# Y$#.” Then they broke into the home, opened all the windows, and hid salmon fillets throughout the house to attract critters and create a horrible smell. It all culminated in a death threat enabling us to file a restraining order and end the ordeal!
That’s just some of the stuff you deal with. It can be emotionally taxing and stressful. The best advice I can give is to put your head down and fix the problem. Take the long view. Remind yourself of your plan, that you budgeted for this, and you can handle it.
…approach every win with appreciation, but don’t let it alter your expectations, or else the next setback will hurt more than it should.
And in balance, there will be moments in this business where you sell a property for $100K more than you planned. There are times when you go to auction with a target bid of $300k and pick it up for $260k. That’s when you want to go out and celebrate. The danger is that those glowing emotions might set you up for a higher fall. You’re not going to be on fire with every deal. Here’s the key: approach every win with appreciation, but don’t let it alter your expectations, or else the next setback will hurt more than it should. Ride the roller coaster and set your expectations right!
If you can handle the stress of setbacks without panicking and appreciate the windfalls without losing focus, you’re ready. You have the long-term mindset to flip homes.