So you want to make a cool $100,000? Popular HGTV shows lead you to believe the secret to getting rich quick is to start flipping houses. From Chip and Joanna Gaines, to Tarek and Christina El Moussa, there are plenty of everyday people making a name for themselves this way.
So a few years ago, after I got married, my husband and I said to ourselves: We could totally do this. He works in construction. I, at the time, was working for a women's lifestyle magazine ripe with gorgeous home decor ideas. We were basically Chip and Joanna, New Jersey-style.
We spent hours pouring over listings on Zillow, walking around our Jersey City neighborhood "scouting" old buildings, and daydreaming about our new and lucrative career as house flippers… until we realized we had no money.
Okay, that's not entirely true. But we certainly didn't have enough capital to start a house flipping business without jeopardizing the other plans we had for our future: a house of our own, kids, the ability to have any semblance of a social life.
Here are some other reasons why our life as HGTV flippers fizzled before we could even give it a fair shot:
You need capital.
That's fancy speak for cash money. When you're flipping homes—especially when you're starting out—a traditional home loan isn't always feasible. And even if it were, you still need down payment money, plus any cash to cover construction costs. Even in less expensive markets, you likely need upwards of $100,000 just to get started. And let's not forget about any holding costs—taxes, utilities, etc.—associated with keeping a property until it's sold.
Finding the right house isn't easy.
You look at three homes, give them cheeky nicknames for your pros and cons list, then pick the one with the most money-making potential, right? So very wrong. It takes lots of time and years of experience to properly crunch the numbers to evaluate a property. Even experienced real estate agents and construction teams get it wrong sometimes. Property values can change during the time it takes to remodel and you can never be entirely sure what's behind old walls, particularly in foreclosures and other homes that haven't been well maintained.
You need a bulletproof schedule.
On Flip or Flop, Tarek and Christina settle on a house, often winning it at auction sight unseen, then have a construction crew there hours later demoing and getting to work. In real life, to properly do a flip, there's tons of planning that has to take place before you can even lift a sledge hammer. You have to finalize your design, get bids from different contractors and trades, submit permits, and file for any necessary variances. Do it any other way, and all you're asking for is trouble.
Not everyone is a designer or DIY expert.
Not everyone can be Joanna Gaines. These guys make it look easy to take a home from filthy to flawless. But decorating for someone else—someone you don't know at all—is even harder than decorating for yourself. It takes years of practice, lots of research, and tons of industry knowledge to nail it. The harsh reality is that sometimes things just look better in your head.
You need to sell very quickly.
So you managed to get through the hardest part of flipping a house. You rode the highs and the lows of renovating, and came out on top: You have a house you're proud of and you're sure it's going to sell for top dollar, though you haven't even staged it yet. (Oh, yeah—that costs money, too!) The open house comes and goes, with no takers or a low-ball offer. Be prepared to keep paying those holding costs until a solid buyer finally comes through. And then, when that offer finally comes in, don't forget about the closing costs.