There literally has never been one single year over the
time that we have flipped houses that I haven't heard the
statement (or some variation, and 90% of them came from
agents), "oh, you can't flip in this market".
And each year, I answer, "Maybe so", or "Hmm, could be", as
I wait for our latest escrow check to arrive.
You will never hear that statement come out of my mouth.
This being said, I will say that flipping in a declining
market does sort of remind me of learning to snowboard on a
black diamond slope. In 2002, 2003, and 2004 if you had
started flipping then it was more like learning to ski or
snowboard on a bunny slope.
The reason is that if you had miscalculated during 2002,
2003, or 2004, the rapid appreciation of the market
combined with the greater fool theory bailed you out every
time. Leased land, floor-plans that resemble a labyrinth,
war zones, glop ons (really bad add ons), overestimating
value, underestimating repair and carrying costs, taking 3
months longer than you thought to make your repairs...all
of these sins were quickly forgiven by the voracity of the
market.
In this market, if you commit these sins, you can and will
be punished, "Thank you sir, may I have another?!"
Right now, it is raining foreclosures. You have to be spot
on...spot on with your rehab, spot on with your repair
estimates, and one of the most important factors,
aggressive in your marketing of the property...in other
words, you better have some idea of what you are doing.
If not, the risk is that in the time it takes to fix up
that property, 3 or 4 new foreclosures go up on your street
that are priced $50,000 below the last lowest priced
property. There is a LOT for a buyer to choose from.
Without espousing all gloom and doom, there is still a
SHORTAGE of freshly remodeled homes out there. Even more
excitiing than that, every month more and more families can
afford a home who could not for the previous 5 years (and
chance are their families are bigger!).
There is a lot to be excited about...but you have got to be
focused, you have to be accurate on your repair costs and
timetable, it has to look GOOD (or why wouldn't a family
save $50k and pick the REO across the street?)...
You need to get creative and put something like a plasma HD
flat screen with an Xbox in the living room, a spa in the
backyard, or something that makes a family emotionally
attached.
You need to make the property enticing to agents and add at
least 2% to the commission of the agent or a free trip to
Catalina Island (not as pricey as you might think) for the
agent who finds you a buyer......AND, you need to factor
these costs in advance!
If you are a beginner and you are saying, "no sweat, I can
do that", then I will always reply, "Go for it!".
Really, no matter how much advice we or anyone else gives
you, the only way to get to consistent success is to get
that pesky falling-flat-on-your-face part out of the
way...unfortunately, there is no way to avoid it that I
know of. It is the only way to get a deep understanding of
the game the same as any other hobby, business, or sport.
You can read hours of books and videos about snowboarding,
it's not going to prevent you from feeling like a complete
jackass the second you click your boots in and try to stand
up!
This doesn't mean you will have an unmitigated disaster, it
does mean that at the end of each project if you don't slap
your forehead at least once and say, "Dohh, I should've",
or "I could've", or "Why did I....?" then you didn't really
learn anything, and there is ALWAYS something you could
have done better.
........hey!....imagine how easy the rest of your
snowboarding or skiing trip will be when you do learn how
to get down a double black diamond!
If you don't like snow up your nose, and you want to take a
more balanced approach, then I have another suggestion for
you: consider wholesaling. The money can still be great
and the risk is considerably less.
Again, CONSIDER WHOLESALING. The money can still be great
and the risk is considerably less.
If you are looking to change careers, get out of your
current line of work so you can have your own hours and be
your own boss, but you aren't crazy about going down a
black diamond right away, don't you dare give up that dream
or tell yourself that you'll do it when the market changes.
Wholesaling means you go on the hunt for amazing deals, but
then you take what amounts to a small finder's fee, pass
the lion share of the profit to another investor, and go on
to the next one.
But do NOT stop there - make it part of the deal that you
can check out what your investor buyer does (or doesn't do)
to the property, how they market it, what it costs, and
learn everything you can from it. Who knows? ...you may
just get hooked on the thrill of the hunt and never even
care about fixing them up.
I'm torn between the two. The feeling you get when you
take a trashed, smelly, abandoned pile of wood and turn it
into a beautiful home....there is no feeling like it. No
matter how many times we've done it, my jaw hits the floor
when I see the work my brilliant and artistic wife pulls
off time and time again..
....BUT, for me, I'm all about the fun of the treasure
hunt. I'm not a fix up guy. I tried to put in a doggy
door once. The box said 15 minutes. It took me two hours
and put me in a really bad mood, and Cindy basically redid
it anyway...sorry, I just suck at it. I admit it. But if
you want a direct mail marketing system to absentee owners
or a screening system to find the best repos fast, stand
back!...Cindy often struggles with email....if we were good
at the exact same thing we'd be in big trouble.
But the number one reason is risk...no repair costs at
stake, no mortgage payments, no agents and picky end user
buyers to deal with...if you are bound and determined to
get out of your job, don't have a lot of money, and not a
lot of contractor experience, give wholesaling a serious
thought to launch your investing career....... just don't
try and add a doggy door, it's impossible.
Be Happy and Prosper,
Kurtis
----------------------------------------------------
Kurtis Squyres and his wife have personally flipped over
280 houses over the past 12 years. Before leaving the
corporate world to pursue real estate, Kurtis managed over
25 million dollars for Merrill Lynch as a financial
advisor. Kurtis continues to invest in and teach real
estate investing full time.
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