Table of Contents
I’ve been asked a bunch of times while running Do Hard Money to help house flippers flip houses: do people really flip houses for a living? The answer is yes, people can absolutely flip houses for a living!
In other words, yes, plenty of people flip houses as their only source of income, but it comes down to effort and how much time you want to put into it. In this article, I’ll dive into how people flip houses for a living and cover the following topics:
- Flipping Houses 101
- Finding Good Deals: The Key to Successfully Flipping Homes
- Inconsistent Income: House Flipping Challenges
- Risks of House Flipping
- Mitigating Flipping Risks through Marketing
- Final Thoughts
Flipping Houses 101
Before talking about how people make a living flipping houses, I want to first explain what house flipping actually is.
What is flipping? In basic terms, house flipping involves buying and rehabbing houses, and it comes down to the following steps:
- Step 1: By an undervalued home, typically in need of some renovations.
- Step 2: Rehab the home to both add value and make it desirable for resale.
- Step 3: Sell the renovated home for a profit.
If you’ve properly analyzed the deal and its associated budget, the cash you receive from the sale will be greater than the sum of A) the purchase price, B) the renovation costs, and C) the holding costs (taxes, utilities, insurance, etc) you paid during the renovation period.
The difference in these amounts is the house flipping profit from the deal.
Finding Good Deals: The Key to Successfully Flipping Homes
Can every home for sale be successfully flipped? Absolutely not. The key to house flipping success is finding good deals on the market.
While property values and potential returns are going to vary market by market, I’ve now personally done and helped clients do hundreds of deals. With all this data, I can comfortably say that the average profit on a successful flip is roughly $40,000.
So, what does this mean for investors looking to flip houses for a living, that is, have this as their only source of income? If you’d like to have an income of $80,000 to $120,000 per year, you’re going to need to complete two to three successful home flips each year, once again recognizing that this number will vary from market to market.
Inconsistent Income: House Flipping Challenges
Okay, Ryan, if house flipping is such a good income source, why doesn’t everyone do it?
Fair question, and it leads to one of the inherent challenges of flipping homes for a living – the inconsistent income.
When you work in a salaried or hourly position, you’re going to receive a check every pay period, regardless of what you do. This represents consistent income.
On the other hand, when you’re flipping houses, you don’t actually get paid until you successfully complete a deal, that is, sell a house for more money than you put into it. This means that you may go a while in between paychecks, a reality that makes a lot of people uncomfortable.
But, it’s also a challenge that can be overcome with some basic personal finance tips: establish and follow a household budget while setting aside an emergency fund. This way, you can create a financial situation that adapts to the reality of inconsistent income.
And, while this income inconsistency may seem like a negative of house flipping, I like to view it as a tremendous opportunity. With a salary, you can work harder or longer, but you’re still making the same money.
With house flipping, the more you work, the more money you make! If you want to do three deals a year and call it a day, that’s fine. But if you want to create a rockstar team, the sky’s the limit when it comes to flipping houses.
Risks of House Flipping
Related to the inherently inconsistent income of house flipping for a living, another major risk is the potential to not find another property for a while.
While plenty of homes may be for sale in a given market, they won’t all meet the characteristics of a successful flip. Consequently, an investor may wrap up a deal and not have another one in the pipeline for an extended period of time, a situation that has the knock-on effect of further delaying your next paycheck.
But, as with all risks, savvy investors can mitigate this one with a little work and effort.
Mitigating Flipping Risks through Marketing
As stated above, a risk house flippers – particularly new ones – face is their pipeline drying up. When new investors dive into their first deals, they typically pour 100 percent of their focus into successfully completing that deal, an understandable priority.
But, to actually make a living flipping houses, you need to look beyond the current deal. That is, you need to develop a marketing strategy that ensures that, while working on one deal, you’re actively searching for and securing the next property.
Once you have this system built, you can smooth the inconsistent income nature of flipping homes, as you ensure that when one deal wraps up (or concurrently with the right team and processes), the next deal begins.
NOTE: A secondary risk of successful marketing is that you may end up with too many homes in your pipeline. But, by wholesaling these excess properties, you can create another quick income source.
After explaining how people make a living flipping houses, I want to leave you with a few final thoughts.
Don’t quit your day job… Yet
House flipping and a full-time job aren’t mutually exclusive. You can start flipping houses on the side while still having the financial security of a job. Then, once you get the hang of it, you can make the transition into flipping homes for a living.
Be prepared to do some marketing
Remember, your real estate agent will help you sell properties, but you need to be prepared to find new properties, and this takes some time and effort poured into a good marketing strategy.
Good software is key
Analyzing deals can be a daunting task, especially for new house flippers. Do Hard Money’s Investor’s Edge software gives investors the analytical tools they need to make sure they create – and stick to – solid plans.
If you keep all of these considerations in mind, making a living flipping houses can very quickly become a reality.
But, as with all real estate investing, the most important thing is actually starting, so go out there and find that first deal!
No matter what path you take as a real estate investor, financing is king. Without access to reliable financing, the best deals remain nothing more than wishful thinking. As such, one of the most important relationships you can build as an investor is with a reliable, trustworthy lender.
The Do Hard Money team would love to build that relationship with you to help with your financing needs. Regardless of your situation and experience as a real estate investor, we can help you meet your goals. Drop us a note, and we’ll figure out the best way to support you on your real estate investing journey.