Inspired by the profits of other developers, Tarek El Moussa decided to try his luck at flipping homes in early 2010. He and ex-wife Christina Anstead bought their first home in Santa Ana, California, for $115,000, put $15,000 into renovations and sold it for $169,000.
Their profit was $34,000, and the couple was signed to flip 13 homes in 10 months on the hit reality TV show “Flip or Flop.” (El Moussa videotaped his first project from start to finish and sent it to a reality TV production company; less than a year later, HGTV signed on with the couple to make a pilot.)
After eight seasons, the “Flip or Flop” star has made millions buying and flipping hundreds of homes, but he also admits he's made plenty of mistakes. Now, in the new original series “Flipping 101 w/Tarek El Moussa,” the real estate investor shares his insights to help aspiring home flippers succeed in the competitive business of buying homes in need of repairs and renovating them for a profit.
Insights from the 'Flip or Flop' star
Flipping homes is one of the most lucrative ways to build wealth, but it does have its pitfalls. Tarek admits that while he understands the real estate market, he doesn't know much about flipping. He figured with hard work and a little luck, he could make it.
Here are some of El Moussa's valuable words of wisdom, shared with CNBC:
Gauge your inventory. The best time to flip a home is when there's a low supply of homes on the market, Tarek says. In those situations, homes tend to sell fastest.
Pricing it right. One of the hardest parts of flipping a home is choosing the right price to resell it at. El Moussa says pricing comes down to logic. “It's just logic. You have to compare like for like.”
Learn to evolve with the market. Tarek says he's had to reinvent the way he does business over the past decade. He acknowledges that the home flipping landscape has changed dramatically since he started flipping homes nearly a decade ago. In an interview with CNBC's “Power Lunch,” El Moussa said the decline in profits is due to rising construction costs caused by the current trade war. And while more people are entering the home flipping market, making it more competitive, homeowners are taking their homes off the market.
Don't be afraid to take risks. Tarek isn't shy about flipping houses in any market. “I flip houses. I have deals in every city in this country.” He typically buys homes in private transactions (homes that aren't on the public market) and then resells them.
Despite the challenges many first-time flippers face, El Moussa believes home flipping can be profitable in a variety of ways: “You can refinance that asset or borrow against that asset. [and with the profits] “We can buy more assets,” he said.