I received an email from a reader the other day that I loved reading – it took me right back to the beginning of the crazy ride that Jason and I have been on for the past few years.
I’m answering Kelly’s questions here on the blog because I thought it might be helpful for anyone else thinking about getting into flipping. Here goes!
Great blog! I’m just wondering how you actually got started? Did u buy a house & live in it and renovate, then sell & start flipping?
Do you live in all your flips or are you really just flipping them in a few months?
We are about to sell our first house & have our 3rd baby, we have lived in it for 6 years & have remodeled a new bathroom, kitchen & turned the garage into a self contained studio apartment with a full bathroom & a kitchenette. We did the majority of the renovations ourselves. I am an interior designer & would love to flip houses with my husband full time. We are currently looking for a new house, not sure if it would be best to buy something to flip quickly or to live in and do the same as we did on this one? Any advice & help on how you got started would be greatly appreciated.
A quick recap of our background – my husband and I were both attorneys before we jumped ship and started our own real estate brokerage in 2009, realizing that our hearts were in real estate after buying and renovating a fixer-upper in 2008.
Having access to thousands of real estate listings is a dangerous thing. Once we opened up the real estate brokerage we saw tons of great little houses that needed some work. You can see where this is going, can’t you?
We bought a flip. This one. I really don’t know what possessed us. We were just feeling super confident about how our own house turned out, we were familiar with the process of getting a construction loan, and we just thought this house was too good of an opportunity to pass up.
We made an offer, it was accepted, and we closed on the house on our 2nd wedding anniversary. Crazytown.
So that’s how we got started flipping houses. :)
Now on to Kelly’s next question – the logistics of flipping. Do we live there while we renovate, etc.?
Heck no. We do not live in the homes that we’re flipping. We still live in the first house that we renovated over 4 years ago. Oh – and while we were renovating our own home we lived with my parents. :)
We’ve opted for this route because our renovations are full-on gut jobs (like this) that go on for months and we absolutely don’t want to live in chaos, and moving 5 jillion times is a pain in the rear. We want flipping to be our job, not our life. Also, I think we’re able to be a little more aggressive in our purchase and sale prices because these aren’t our homes – we aren’t emotionally invested in them, they don’t have to work for our lifestyle, etc.
Now for the big question – since we aren’t living in our flips, how do we own multiple homes at the same time?
I’m not going to get into the nitty gritty, but at first we took out loans. We bought our first flip with a construction loan, which turned out to be a good thing. The bank obviously wanted to protect their investment and get their money back so the bank did a little of its own vetting of our contractor, required periodic inspections of the work, and had to sign off on any draws (i.e., payments) that were made for completed work. Kind of a safety net of sorts. We had just been through the whole construction loan process with our own home, so we were familiar with the process, had a contact at the bank, and felt comfortable with the whole thing.
Today, we have moved beyond construction loans and are working with a combination of cash and a line of credit. This combination is working really well for us because it allows us to have minimal interest payments and we are also able to purchase a flip as quickly as the title company can get the documents ready because we don’t have to go through a loan approval process each time we want to buy a house. I don’t have any magical answer for how other people can gain access to a line of credit – you just have to get out there, apply for it, and see what happens.
So really, Kelly, my answer as to whether you should live in a house and flip it or buy a second home to flip is . . . it depends. Helpful, I know. Do you have the financial means to own two homes, and renovate one of them? Did you like living in your current home while you were renovating it, or did it drive you crazy? Do you want this to be the way you make your living, or will it be a hobby that makes extra income? Will you be doing the work yourselves, or hiring someone else to do it? These are all the questions that you need to ask yourself before you take the plunge – how you answer them will dictate which route you should take.
I hope this was helpful! Let me know if I’ve just stirred up more questions and I’ll do my best to answer them. :)