Flipping Houses is Great Until You Grow Out of It – Local Records Office

LOS ANGELES – Growing out of flipping houses and making extra money? Yes, you read it right. Though I have experience in rehabbing real estate for profit, it’s not my cup of tea. I harbor deep respect for those who’ve been able to consistently pound out several a year over a long timespan. Regardless of what most of the silly TV shows may imply, it’s a road strewn with potholes and nails even in the best of times. Rehabbing for profit is one of those things where the good news often morphs into the ‘too good’ news. Huh? What?

 

Things Change, People Change

 

Your buddy, Don, started flipping houses back in 2001. His day job was full time, but he worked like a demon on weekends and some nights. Slowly but surely his learning curve hit the point where he found himself doing three in one year. This inspired him to think about quitting his day job — which he eventually did a couple years later.

 

Since then Don’s been setting the world on fire. Instead of making $60,000 at his old job, he’s been averaging well over $100,000 a year. In fact, the last couple years he’s topped $200,000. He and his wife Lexxie rented their modest 1,375 square foot home, and bought a trashed REO in an estate somewhere. They did so well with it that when finished they were able to refinance for $300,000. This was more than they paid + rehab costs. They bought the BassKiller Don had always wanted with the excess cash.

 

 

The only other non-real estate purchases they’ve made are Lexxy’s new BMW lease, and Don’s new Ford 250. He felt her car was a luxury though his truck was an absolute necessity for his job. He wasn’t necessarily mistaken, but brand-new? Really?

 

Over 10 Years Flipping Houses

 

Well, Don’s 47 and Lexxie, not far behind, is 45. They love their home, the business is hitting on all cylinders, and both kids are in college. Their lives couldn’t be better.

 

And there’s the rub.

 

Though kidding themselves that their business was the key to a comfortable life, their plans to add long term investment properties with an eye for retirement never seemed to materialize. Then one perfect Saturday afternoon while at Lexxie’s cousin’s home for a BBQ, the conversation shifted to — you guessed it — her cousin’s impending retirement. Seems it was going to happen next summer, as planned. Their home had been paid off for a couple years now, which enabled them to add to their cash reserves. Between her teacher’s pension, his Social Security, their free and clear home, and a couple debt free duplexes they’d acquired when their kids entered high school, they weren’t going to be rich, but would be able to live worry free, and do a little globe trotting.

 

My First Time Flipping Was Awkward

 

Though they didn’t live up to their eyeballs, they knew much of their lifestyle had been a bit more extravagant than necessary. Yes, they diligently saved money, but not nearly what they could have. Now, 18 years from the coveted 65th birthday, Don knew they weren’t within shouting distance of any sort of reliable retirement income. Not only that, but he knew in his heart of hearts he wasn’t going to keep flipping homes into eternity. In fact, though he hadn’t let on to Lexxie, it was already wearing on him. His body was showing the signs of a decade of a hard charging rehabber.

 

He knew hiring his labor replacement wouldn’t be that hard. He was already acting as foreman, so he’d be able to do that even better now. It’d cost him the profits of a rehab or two. Since he was now doing 8-10 or more annually now, that wasn’t a killer. Still, he had to face the truth about retiring: It just wasn’t going to happen if he didn’t make changes in his way of doing things.

 

The ‘Too Good News About Flipping Houses’

 

The bottom line to this tale, the lesson to be learned, is simple. Don and Lexxie had the guts to start a business that ultimately succeeded to the point Don was able to quit work. Thousands would love to be in their shoes. The thing is, by neglecting anything remotely long term, they’ve become trapped in the financial net of living the ‘Too Good’ life, without making room for when that life would out of transition into the reality of retirement. When this happens, rehabbers realize that even though they’re physically breaking down, something easily remedied, creating a doable retirement isn’t the same as throwing up new kitchen cabinets.

 

Get your long term investing for retirement portfolio started — and sooner rather than later.

 

In the last five years or so I’ve personally spoken with about half a dozen rehabbers in their mid to late 50’s — or older — who’re still rehabbing because they have no choice. What’s worse than that? Having kept a home or two each year the last several, only to learn they can’t be sold for almost any price in the local market. Their cash flow is enough to live on, but not enough to do much else.

 

Learn from them. Don’t be that 50-something flipper with the thousand-yard stare.

 

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