Flipping a house isn’t as simple as TV makes it look. Before diving in, here’s a reality check.

HGTV makes flipping houses seem like a breeze, enticing loads of people to try their hand at it, either as a side hustle or a full-time gig. They think they’ve got it all figured out after binge-watching a few episodes.

Because I know the question is already floating around, let’s clear the air—yes, flipping houses can be profitable. However, it’s just as easy to lose a lot of money flipping properties. TV shows gloss over the many potential setbacks, from renovation mishaps to unexpected costs, that you could face when trying to flip a property to sell or rent.

MY BEST RECOMMENDATION FOR THE HOUSE FLIPPING BUG?

Find a mentor or get advice and education from someone already successful at flipping. That’s one of the reasons I created MCM University. But if you’re ready to dive in on your own, my best advice is to keep in mind that it’s not just about having cash; it’s about knowing the game.

Here are three top priorities on my list when it comes to flipping a house:

Buy the Property. This means you need to have an idea of how to do the paperwork, who is going to inspect it, where you’re getting the money, and what title company is closing it.

Renovate the Property. At this point, either you or somebody else needs to know what needs to be done and how much it’s going to cost. Overspend, and you’re cutting into your profits. Skimp, and you might not sell the place. It’s a balancing act.

Sell the Property. If you nailed the first two steps, you still need a buyer. Misjudge the market or overdo the renovations, and your flip could flop. Every month a flip house sits empty, it eats into your profit.

It’s important to note that “Find the Property” didn’t make it onto my list. That’s not an oversight either; there are deals everywhere all the time. You just need to know where to look! A common misconception among flip investors that it’s all about the property. However, true success hinges on understanding the three critical items mentioned earlier.

PREPARATION IS KEY

If you’re still ready to get started in the flip game, keep in mind that preparation is key. Before venturing into flipping, make sure you have the following in place:

Investor Financing. Most importantly this includes a lender who understands and works with real estate investors. Don’t try to pass your investment property off as a primary residence or some scheme like that. Treat this like a business and find lenders that specialize in investor lending.

Contractor. I know how to do a lot of renovations myself. That doesn’t mean I’m going to do them myself. My time is better spent finding deals and talking to homeowners than hanging drywall or pulling out kitchen cabinets. Find yourself a competent contractor who can do the repairs for a reasonable price.

Buyer Strategy. A surprising number of investors have no plan once the house is done, they just kind of assume they’ll plop a sign in the yard and be done with it. Well, it’s often not that simple. Selling a house to a wholesale buyer versus a family calls for entirely different costs in renovations. Each one may have different conditions of sale. Thinking about this ahead of time will help reduce those holding costs that can eat up your entire profit.

ARE YOU READY?

With these foundations in place, flip investing becomes easier with every house you renovate and sell. It takes time to gain experience and foster an understanding of renovation needs and market dynamics. Do it right and you can make some big money.

However, while flipping offers lucrative returns, it’s crucial to acknowledge its limitations. The perpetual hunt for deals, coupled with the urgency to sell, can lead to a cycle of financial strain, and missed opportunities. Flipping yields returns but falls short in wealth accumulation compared to alternative strategies like long-term property retention.

While flipping generates returns, it doesn’t generate wealth. If you want to get wealthy there are much better ways to invest in real estate, such as buy and hold.

If you want to learn more about real estate investment strategies, join us for our Introduction to Real Estate Investing class. Visit us at  www.themcmu.com to save your seat!