Flipping houses. Yes or no?

[Mosaud1998]

One of my close friends has been flipping houses with his dad since middle school.

He recently received his real-estate license and now will be selling houses while continuing to flip houses on the side. He told me he made almost $80k in 6 months off of one house he flipped(he mainly buys and flips houses in the city).

Since he got his real estate license, he doesn't have to pay a realtor to list his house and give the realtor a certain percentage.

I've been thinking about getting into the real estate business and flipping houses on the side as a weekend thing or hobby for a while. But, with school coming back into the picture, I've decided to finish up school (I've got 2 years left), get a good job with my degree then my friend and I can flip houses together and split the profit. Seems like a pretty good idea and he's down to do it.

Just out of curiosity, has anyone else flipped houses and made a decent profit from selling?

I know a few people that graduated high school and just went straight into real estate and are making a decent living. I know a few people that graduated college and now are flipping houses with friends or family members as a side hustle.

My parents are thinking about buying an apartment in the city close to the universities out there and renting them out to college students. But, I dont think there's going to be that much of a profit coming in return. I mean, maybe $2k a month from rent(without emergency repairs and such)? Which translates to about $24k a year.

I'd rather flip a house or two every year and make $63k+ a year.

What do you guys think?

[Joekerr]

I think its a lot riskier than he is letting on. You never know what is behind those walls and that can turn a flip into a money draining nightmare where you lose your shirt. You can definitely make money too, but there is a not inconsiderable risk attached. Good luck with whichever way you go.

[CTinline-six]

It sounds like your friend and his father have experience. If it's something you'd like to get into and have interest, go for it!

Definitely finish school and get your degree, it's always good to have options.

[CTinline-six]

Originally Posted by Joekerr

I think its a lot riskier than he is letting on. You never know what is behind those walls and that can turn a flip into a money draining nightmare where you lose your shirt. You can definitely make money too, but there is a not inconsiderable risk attached. Good luck with whichever way you go.

This for sure.

It sounds like they have experience, but it's not like those reality TV shows. There is a huge amount of risk if you don't know what you are doing, what laws, regulations and codes apply, etc.

[vreihen16]

Because college students, the damages will usually be way higher than with normal tenants unless you get lucky.

Buying investment properties with mortgages and then renting them out to people with lesser credit ratings is supposedly a viable strategy, but your financial benefit will come many years down the road when the rent money pays off the mortgage and you own the property free and clear. Everyone and his/her brother seems to own an AirBNB or ten these days, so there's probably a similar opportunity there with a potentially higher-caliber of tenant.

With the cost of dorm rooms, I know that some parents would buy a condo near their kid's college and use the dorm money to pay the mortgage. They then encourage the kid to find a room mate, who ultimately contributes to the mortgage as well. After 4-6 years of college at least pre-2008, the profit from appreciation and paying the mortgage would pay a good chunk of the kid's student loan off as a graduation gift.

Disclaimer that real estate is not my gig.....

[Mosaud1998]

Originally Posted by vreihen16

Because college students, the damages will usually be way higher than with normal tenants unless you get lucky.

Buying investment properties with mortgages and then renting them out to people with lesser credit ratings is supposedly a viable strategy, but your financial benefit will come many years down the road when the rent money pays off the mortgage and you own the property free and clear. Everyone and his/her brother seems to own an AirBNB or ten these days, so there's probably a similar opportunity there with a potentially higher-caliber of tenant.

With the cost of dorm rooms, I know that some parents would buy a condo near their kid's college and use the dorm money to pay the mortgage. They then encourage the kid to find a room mate, who ultimately contributes to the mortgage as well. After 4-6 years of college at least pre-2008, the profit from appreciation and paying the mortgage would pay a good chunk of the kid's student loan off as a graduation gift.

Disclaimer that real estate is not my gig.....

I hardly know much about real estate myself

I just ask my buddy for real estate advice

[RickFLM4]

$63K is not that much profit relative to the risk and time investment necessary IMO. Why not ask your friend if you can participate with him as a passive investor so you can leverage their experience and have less at risk?

[TXSTYLE]

It ain't for everyone.... Trust me. Speaking from experience.

[David70]

Just things I think worth considering -

$63k every year or two is far from guaranteed and are you planning on doing the work yourself (or even part of it) or is this completely with paid work? How expensive of a house do you have to buy to get this $63k? Can you afford to buy the house? The requirements for buying house you don't live in are stricter and come with a higher interest rate. Is the $63k actual profit (buying, selling, carrying costs)?

My first house was an old house with three apartments, I lived in one and rented out the other two, they covered the mortgage and I fixed it up. Bought it for $106k, put $55k into it and sold it for $250k. Lived there 7 years and a lot of work but it was worth it. Now in process of complete reno on house next door and will rent it out. Worked on it for a year but most work was paid for. I doubt this one will be a great investment but a big part of why I bought it was to have say in who lives next door and I plan on putting a 2 car garage in the back of their house and using it for myself.

[W Cole]

Yes.

Depends on your market though. You need scale to make it worth your time. Flip a $5mm house vs a $500k house if you can get the capital together. I think the sweet spot is large scale with light rehab.

Doesn’t seem very risky to me. Your risk factor is primarily macroeconomic if we go into a recession midst flip you’ll be stuck holding the ball. But if you’re doing quick flips vs ground up construction this risk is mitigated from a timing and debt perspective. You are buying the properties with non-recourse government backed mortgages at 80-what 97%? LTV. So your worst case scenario downside is 20% which isn’t going to happen.

Keep in mind with your apartment example I’d imagine it will be multi tenant and you will have expense sweeping 40%? Or so of your cash flow. But you will be getting the benefit of purchase price appreciate and the tax benefits of depreciation/1031 exchanges.

[Murf993]

Originally Posted by Joekerr

I think its a lot riskier than he is letting on. You never know what is behind those walls and that can turn a flip into a money draining nightmare where you lose your shirt. You can definitely make money too, but there is a not inconsiderable risk attached. Good luck with whichever way you go.

My wife and I have moved more than I'd like to have. But we have bought well, reno'd and sold for decent profit. We have never had to sell but did so when the numbers were right. We have only been together for 16 years now, and this has worked well for us. We have talked about buying a house just to flip, we know there is money in it but risk too. I don't know if the place were in is the forever house but we are now debt free living in a pretty fine home that I never thought would be something I could afford. I guess my point is there are different ways to approach house flipping. What the TV shows do is a very full time job full of risk.