In the HGTV version of your life, you would spend your days leisurely driving around looking for neglected gems in up-and-coming neighborhoods. Then you'd fill them with hand-selected shabby-chic decor before selling them for triple your investment.
Then there is the real world. In the real world, you already have a job that you need to pay the bills, but you dream of making a little extra money as a real estate entrepreneur, maybe someday doing it as a career. That's a smart way to get started, and there many benefits to investing in real estate part-time. Here are a few compelling ones:
Benefits of Part-Time Real Estate Investing
- Great ROI for Part-Time Work: Real estate investing provides one of the most lucrative opportunities for making extra money on a part-time basis. Even at a part-time pace, you can realize investment returns more quickly through home flipping than you can through other investments like the stock market. RealtyTrac reported a sharp increase in fix and flip return on investment (ROI) in 2016, with an average return of 49 percent, compared to 27 percent in 2006. Washington DC fix and flips remain among the most profitable in the nation. See what areas have especially hot in our Top 5 Zip for Flips blog. And check out Zillow's predictions for the Top 5 DC Neighborhoods in 2017.
- Test the Waters: Even with great potential for profit, real estate investing can be risky. And most people don’t have the luxury of trying a new job with no guaranteed income for months at a time. By fixing and flipping part-time, you can try your hand at real estate investing while still having the cushion of a regular income. Many real estate investors start out part time, and move to full time when they gain confidence and experience.
- Use the Other Half of your Brain: Many rehabbers simply enjoy the process of flipping homes, scouting out great deals and bringing new glory to a diamond in the rough. Designing and renovating kitchens and baths can be creative, fun and rewarding. The physical work and challenges of a part-time fix-and-flip project are often a welcome contrast to the slow pace and routine of a full-time desk job.
- Bargaining Power for Financing: There are many financing options available to real estate investors beyond traditional banks, including private money and hard money lenders. These lenders specialize in funding fix and flip or renovation project and lend you money for your project based partially on equity in your property. They also also take into account your entire borrower profile, including cash flow and credit score. Regular income from your other, full-time job, can you help you qualify for credit more easily and have more negotiating power when selecting a lender and loan. And because buying the best neglected properties is often very competitive, having more access to financing can give you a big advantage over competitors when bidding on a property.
How Do I Get Started?
A good first step is joining your local real estate investing (REI) club. There are many of these in nearly every city and region in the US. Several local REI clubs in the DC area are DCREIA and Traction. These clubs are full of people like you, just getting started in real estate investing, as well as many with more experience. Most groups meet monthly to talk about the local market and share challenges, tips, and successes. Their real-world experience is invaluable in showing you what to expect as you get started. These clubs can also connect you with dependable local real estate agents, lenders, and contractors.
So either dip your toe in or take the plunge into real estate investing. Look to Walnut Street Finance to be your lending partner. We provide fast and flexible funding for fix and flip projects. Visit our website and blog for more information and resources.