Some only see it as a side job, but can you actually make good, consistent income that replaces having a 9-to-5 job?
You may have driven through your town and seen properties that have so much potential but are sitting there left to rot. If only someone would take the time to see that house for the hidden gem it is! Wait a minute, why not you? Maybe you could be the real estate investor who turns this dilapidated eyesore into one of the hottest properties on the market! But are you cut out for house flipping? Is house flipping a good career or just another scam?
Becoming a house flipper is an excellent career choice for someone disciplined with money but also willing to take risks. The majority of experienced real estate investors who flip properties report having at least $100,000 in yearly income, so if you’re eager to put in the work, you may find yourself living a very comfortable life.
As with all things real estate, there’s more nuance to it than you think. So let’s break down what a house flipping career might look like and the things you’ll need to consider before making the leap to getting business cards with “Real Estate Investor” listed as your job title.
What is House Flipping?
Before we get into how this business works, I want to ensure we’re all on the same page.
For those unfamiliar with the term, house flipping (also known as “fix & flipping”) is a process where an investor buys a home at below market value, rehabs the property, and sells it for a profit.
The Pros of Becoming a House Flipper
Before we get into the nitty-gritty, let’s talk about all the perks that come along with starting your own real estate investment business.
- Your business, your rules – You’re the boss! Want to take the day off to spend it with your kids? It’s your call. As an entrepreneur in the real estate industry, you’ll have nearly unlimited amounts of flexibility in how and where your business is run.
- The amount of profit is greater than many other industries – When you’re able to do it right, you can expect to see tens of thousands of dollars in profit for a single house flip. What could you do with an extra $30k in your pocket?
- You can be as hands-on or hands-off as you want – The beauty of real estate investing is that it can cater to a variety of personalities. If you love getting your hands dirty, then you can! If you’d prefer to stick behind a desk and let the pros handle renovations while you crunch numbers, you can do that, too.
Things to Consider Before Relying on House Flipping as Your Day Job
Before you get lured into quitting your day job and going into house flipping full-time, there are some things you need to know.
- Flipping is not a business that has immediate gains – The average house takes six months to flip, and that’s when things go according to plan. How will you support your family during that time? You’ll be on the hook for not only the costs to rehab the house but your regular monthly expenses, too. Do you have enough savings to float you past that six-month mark?
- Flipping is risky – There’s no guarantee you’ll be able to unload your investment property at the price you want, especially if you’re in a buyer’s market (more inventory than buyers). You may end up having to make some difficult choices that involve simply trying to break even so you can walk away. How open to risk are you when it comes to your financial well-being?
- The competition is fierce – Reality TV has made many people pick up the hammer and checkbook with varying levels of success. To become successful, you’ll need to find ways to source inventory that avoids the stiff competition on the MLS. I recommend looking into Driving for Dollars as it’s one of my most successful methods for finding off-market properties.
How Much Can I Make Flipping Houses?
The amount of income you can earn by flipping houses is affected by the cost of living in your area, your expenses, and the market conditions. To give you an idea of what flippers are reporting as their yearly income, check out this chart:
|State||Average Reported Yearly Salary (2020)|
Before you start to envision rolling around in piles of money, there are some things to consider when looking at these numbers.
First, these are incomes reported by experienced real estate investors. While it’s my hope that you’ll net six figures in your first year, the reality is most people quite before they find a single deal. The longer you stick with it, the higher your income will be as you learn the ropes and start to cut your costs.
Next, these investors most likely have multiple properties under their belt and aren’t earning hundreds of thousands in income on a single flip. Our clients at Do Hard Money report an average of $39,714 net profit per deal. To get to a six-figure salary, you’d need to flip at least three houses per year.
Lastly, these investors are serious about their businesses. Their income isn’t taken from the profits; it’s already a built-in cost that’s factored into their yearly financial projections. If you want to become a successful flipper, you’ll need to pay yourself first instead of taking a percentage of the profits. Your hard work deserves to be compensated, and falling into the trap of waiting for profits will keep you in a neverending cycle of chasing money.
How to Earn More Money as a Real Estate Investor
Don’t get frustrated if you’re not making as much money as other investors in your state. Here are two of the top methods you can use to increase your earning potential.
Diversify Your Investments
Fix & flips may be the most popular route of real estate investing, but it’s not the only option. If you don’t have a lot of cash or aren’t handy enough to turn a profit fixing up a property, there are still ways you can become a real estate investor.
Wholesaling is a method of real estate investing that has a low barrier of entry. When you become a wholesaler, you’ll source homes and get them under contract, then sell the contract for a profit to another investor. The only money you’ll need upfront will be earnest money to reserve the contract. Earnest money is rarely more than a few hundred and should be factored into your sales price when passing the contract off to another investor.
There’s also the rental route of real estate investing. With rentals, you purchase a property and rent it out to others, using the rent payments to cover your mortgage and other expenses. This method requires more money upfront since you’ll be purchasing the property but offers the potential to have a steady monthly flow of income, especially after you get multiple rental properties under your belt.
Learn a New Skill
Consider learning something new to help reduce your business expenses and increase your income. Whether you want to take a few business and accounting courses or learn basic plumbing or electrical work, improving your education is one of the best investments you can make.
If you’re able to get it right, house flipping can be an excellent career to get into. I want you to be successful, and I genuinely believe anyone can become an investor so long as they’re disciplined and go into this with their eyes open. Give this guide some thought and consider all the moving parts that will go along with your first flip before putting down a deposit so that you’ll be prepared for whatever comes.