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It’s become incredibly popular to see people flipping homes for a profit on channels like HGTV. Flipping homes has also become well known in real life as well.
There are quite a few people who aren’t on TV that make a living flipping homes. However, in the TV shows and in blog posts, you see that many of these people flip homes as a full-time gig. Is flipping homes worth it as a side hustle?
You Can Make A Nice Profit
Flipping homes can be profitable. While the market may seem like it’s becoming over saturated with other want to be home flippers, homes are still being flipped and sold successfully. In fact, successful home flips increased 3.1% from 2015 to 2016.
If you have the funds to invest in flipping homes, know your area, and can sell your flipped home easily, you can walk away with a nice profit.
The gross margin (sales – cost of goods = profit) for flipped homes is around $30,000 right now, which is about as much as some people make in one year.
So the profit opportunity is there, but there is work involved in earning that, and not everyone will make that amount (especially on the first home flip!). However, a profit is a profit, and the extra income can be handy when you are flipping homes as a side hustle.
Are you interested in real estate, construction, or marketing? Flipping homes as a side hustle can help you gain knowledge and experience in all three. If you are doing this as a side hustle, you won’t have a lot of time to devote to flipping, but you’ll still have enough time to learn.
For example, you’ll have to make sure that you hire the right contractors and that you understand what the need/ask from you. You’ll be making decisions regarding doors, foundations, roofs, and more.
You’ll be deciding what appliances and fixtures go into a home. But a contractor will show you the ins and outs of turning the home from trash to treasure.
You’ll also learn how to market the home to sell (and sell quickly), how the home buying and selling process works, and how it can be working as an investor vs. just a homebuyer.
While these skills may not work for every aspect of your life, you’re bound to find a few nuggets of knowledge that you can use day to day.
Networking can be what helps you sell your newly flipped home. You’ll be working with so many different people, from realtors to contractors to lawyers, that your networking skills will grow.
Plus, you’ll gain contacts in the industry, and that is invaluable when you need help or something goes wrong.
If you are trying to flip homes as a side hustle, there will be times where you just can’t do everything, even if you wanted to. This is when your network will come in the most handy. You’ll be able to rely on those that can help, and who are well versed in the process of flipping homes.
You Can Take Your Time
If you aren’t flipping homes full time, there is typically no need to rush to meet a 4-6 week deadline of flipping the home and selling it to the highest bidder. While this can also be a negative (see below), it can be seen as a positive for a couple of reasons.
For one, if you choose, you could live in the home while flipping it, thus lowering your cost of living, and giving you more time to flip on your own terms without worrying about money. For two, you won’t be constantly stressed for trying to meet unrealistic deadlines.
Expensive To Start
If you are looking to start flipping homes, it can be a bit expensive to start. Now, if you have the cash flow to buy a property outright and flip it, that’s always an ideal choice.
However, many house flippers, especially first timers or side hustlers, don’t have that kind of cash flow. So instead, many gravitate towards mortgages, loans, and credit cards to help them finance their house flip.
This is why you may want to stay in the home as you renovate, and it can cause friction between spouses or family members if they are working on the project together.
Flipping a home can be an expensive project, so it’s important to keep that in mind if you aren’t financially stable or don’t want to risk your investments.
Can Turn Full Time
This may not seem like a con, but a side hustle is supposed to be a part-time income maker. It can be easy to get caught up in the to-do list of flipping a home, even if it’s only supposed to be a side hustle.
Plus, stressful situations in home flipping can carry into your full-time job, other business, or even personal relationships.
If you sense that the time you are committing to flipping the home is outweighing your time everywhere else, you will have to cut back. Flipping homes can be worth it as a side hustle, but you also have to treat it as such if you want to be able to balance everything.
If you sell the home you’ve flipped in a year or less, taxes are considerably higher than they would be if you sold the home after a year or more of purchase. Even if you are flipping homes as a side hustle, many people would want to sell the home as fast as possible.
However, the taxes you’d owe would eat up a bit of the profit you want to make.
By just waiting one year, the taxes owed could lower by as much as 20%. Sounds like a good deal right? Not quite. If you’re paying an exorbitant amount on a mortgage, property taxes, upkeep, etc. the taxes taken may actually be a welcome relief.
So, this isn’t necessarily a con, but it is something to be well aware of. Play with the numbers and see how you can keep your max amount of profit, whether that be selling the home faster, or staying in it longer.
The Home May Not Sell
While the popularity of flipping homes is increasing, it’s still important to remember that the home you renovate may not sell, might sell after a long period of time, or may sell for way less than you wanted it to so you could profit.
Flipping homes is a risk, and while the risk can pay off, it can also hinder your finances.
If this is something you are afraid of, there are a few ways to make this less of a possibility. The first would be to make sure you are buying in a market that will favor you when you sell the home.
For example, homes in neighborhoods that are expanding rapidly, homes near good schools, and multi-unit properties all tend to fare well. Keep this in mind before investing in a home that you aren’t sure will sell or not.
So what’s all of this going to cost you as someone who flips homes as a side hustle? While costs vary, it’s important to understand how it all adds up.
You won’t just be paying for the house, you’ll be paying for the repairs, the staging, the lawyer and realtor fees, and more depending on your state. Plus, throw in taxes, and you have a lot to pay for.
If you plan on pursuing this part time, it’s important to know the costs associated with flipping a home, and how you plan on making up the lost income that you won’t have while renovating and trying to sell.
Will the cost of everything make you broke or worried about money? Will it take you away from your job or business to the point where you are losing income? If so, this may not be the side hustle for you.
Is Flipping Homes A Viable Side Hustle?
So in the end, is flipping homes a viable side hustle? If you love the sound of the pros and can manage the cons, I’d say it’s worth it to dive into flipping homes.
However, if the cons could hold you back and make it nearly impossible to actually make some money, this may not be for you.
Also, you have to consider the time commitment of this side hustle. Sure, you can do it in conjunction with your job or business (or even if you’re raising a family), but it’s a lot different than most side hustles.
For example, you typically can’t flip houses in the comfort of your PJ’s. There may times where something goes wrong in the middle of the night and you have to wake up to fix it.
You may play the waiting game from time to time, and that may cut into personal or family time. There will be some longer work days involved.
While it can be a side hustle and something you work on part-time, it will take a promise of full-time commitment when needed.
You won’t be able to just drop a house flip like you could taking surveys if you get busy. You won’t be able to just get rid of it as easily as an online gig that just isn’t working.
This is a side hustle that will take a little more time and effort, so it’s not something you should jump into head first without plenty of time, research, and thinking.
How To Make It All Work
If you do choose to pursue flipping homes as a side hustle, there are ways to make it work for you!
First things first, set boundaries. Don’t want a text at three in the morning? Let those working with you know. Want to have time to eat dinner with the kids? Make sure you turn off all electronics. Setting boundaries will keep you from stressing.
Also, set boundaries with your money! Don’t buy an expensive door just because someone tells you too. Research doors in your budget and choose the best one for you.
Flipping a home doesn’t HAVE to be expensive, no matter what the HGTV shows say. However, if you aren’t setting a budget, you may spend a lot more than you want too.
Keep A Binder
There may be times where you just can’t remember that one paint color you wanted to use for the kitchen, or can’t remember your contractor’s cell phone number.
If you aren’t organized, you may lose important paperwork, numbers, and so much more. So instead, keep everything organized in a binder specifically designed for the home you are flipping.
Everything will be organized, you won’t have to remember every little detail, and you can easily reference anything you need.
Trust Who You Employ
Flipping a home is no easy feat, and if you plan on doing it as a side hustle, you’ll have to work with people to help you make that happen.
If you don’t trust your contractor, your realtor, your lawyer, and so forth, you may end up working more hours over a period of time than you would if you did trust them.
Find people with references, online and offline reviews, who have ties to the community you want to flip your home in. These are the people that are going to work with you and give you the best bang for your buck.
Plus, working with them means you can take some of the stress and time off your shoulders. By entrusting them with helping you flip a home, you’ll be able to focus more of your energy on what really matters during the process.
Flipping homes isn’t just for the full-timers, and it can be a lucrative and rewarding side hustle for those willing to put in a bit of work. It’s been said that almost anything can be turned into a side hustle, and that includes renovating homes and selling them.
Plus, who doesn’t love a good transformation story?
If you have any thoughts on doing real estate as a side hustle, we’d love to hear it in the comments below. Thanks for reading and happy frugaling!