Why We Don’t Flip Real Estate as a Part of Our Business Model
As we meet additional contacts and speak with other real estate investors, one question we are asked frequently is,“Why don’t you Flip Real Estate?”I understand where the question comes from, as many individuals feel flipping is the easiest path to investment riches. They make it look so easy on TV and sound like a cinch in the real estate Books. The fact is, it is not easy but it certainly can be very profitable if you can devote the time and energy. There are four reasons we don’t flip properties as part of our business model:
First, we already have full time jobs and we don’t want another full time job. If you are going to flip real estate for maximum profit you will need to focus on flipping deals quickly. Having a full time job gets in the way of a quick flip. Losing days to travel or work can significantly increase the carrying costs of a flip. The successful flippers we know treat flipping like a full time job and need to get in and out of a deal as fast as possible. With the Buy-and-Hold approach, we can lose a day or a week, and in the grand scheme of things wouldn’t really feel the impact. We are working towards the steady long term cash flow and not the quick turn of a flip.
The second reason we don’t flip real estate is that our investment market is three hours away from home. While the drive is easy, it is far away and we can’t make daily trips easily. If you flip properties for a living you will need to be onsite all the time and drive by the house unexpectedly to ensure work is progressing as planned. Even if you don’t do the work yourself, you would need to manage the work, timeline, and quality of your contractors. Being three hours away significantly reduces our ability to efficiently perform such tasks.
The most important reason we don’t flip properties is, we don’t like to sell. We buy properties with the intention of holding them for 10 plus years. We are building a stream of cash flow payments that will build into a mighty river as time goes by. Selling a cash flow house just doesn’t make sense to us.
The last reason we don’t flip real estate is that selling property in this market is really hard. We are in a strong buyers’ market and we want to take advantage of the market condition and not become a seller. Perhaps in five years when the market is reversed, we might sell some properties only to gain liquidity or to buy another apartment building. In the end we know flipping real estate can be very profitable if you do it right, but we don’t want the extra work, we live too far away and we hate to sell our properties.