Quotes from Mike Davis were taken from the radio segment, Real Estate Live and Local, which airs every Tuesday at 11:30 on KLWN 101.7 FM and 1320 AM.
The phenomenon of house flipping has grown exponentially over the past decade with more and more Average Joes getting in on the game. The idea is that a real estate investor buys a house and then sells it for profit, but that sale usually doesn’t occur until the investor puts time and money into repairs and renovations.
With so much work having to go into a typical house flip, with no guarantee of profit, one might wonder where the appeal lies.
“I blame HGTV,” McGrew Realtor and avid house flipper, Mike Davis, says. “They make it look fun and easy, and it’s not.”
Television shows portray the process of house flipping as overwhelmingly positive, but it’s important to be aware that behind the glossy media portrayal, there are challenges. Real-life flippers don’t have a production studio behind them to put out fires.
“Looking at what you want to do and how much you want to spend, I always laugh and say double those initial investments,” Mike says. “You have to be realistic about your financial status.”
Knowing your cash flow capability is the first step. Financial expert, Dave Ramsay, highly recommends flipping a house with cash instead of credit.
“Flippers who take on debt for their purchase pay interest for months, which only increases the amount they have to sell the house for just to break even,” Ramsay says.
Mike recognizes his wife and fellow McGrew Realtor Karyn Davis as CEO of their house flipping business.
“I give my wife Karyn credit for the vision of properties,” Mike says. “You have to have somebody that can see what the house will look like, and then what its after-renovation value will be.”
See one of Mike and Karyn’s home renovations in the video below.
Many house flippers try to cut costs by doing repairs and construction themselves, but it’s important to recognize limitations. Contractors can save time and money down the road.
“You have to get a good general contractor because they have to do things you can’t do,” Mike says. “Define who’s going to be on your team and be able to count on them.”
Mike and Karyn have something that average flippers do not: a realtor-based support system. They utilize their McGrew Real Estate family to ensure that they get the most bang for their buck.
“We work with them closely. Our agents are great … they have local market knowledge,” Mike says. “It’s the back-end of the house that you don’t see while you’re out there standing in mud putting landscaping in the front yard.”
House flipping is not a “get rich quick” solution. According to ATTOM Data Solutions, house flipping rates spiked a nine-year high in the first quarter of 2019, but the gross profits and return on investment are worsening.
“If you’re going into it just for the income I think it’s going to be a tough road,” Mike warns. “To have $5,000 in your pocket and a great set of tools, it’s going to be tough, because it’s more advanced than that.”
Mike and Karyn have a motive for flipping houses besides the extra income. They seek to give back to the community they love.
“We wanted to take properties in town that we felt could really be brought back to the status that they had,” Mike says. “Probably in some ways it has taken expense out of our own pockets, but we’re proud of what we’ve done and how the houses have looked.”
Follow Mike and Karyn’s house flipping journey on their Facebook page at White Picket Team at McGrew Realty.