Everyone has a reason for starting a career in real estate, and we’ve told our story time and time again.
But one trend we’re starting to see is the rising number of young people jumping into the real estate market because social media has taught them it’s an easy way to make money.
(Spoiler alert: It’s not. As in any other industry, success requires dedication, focus, and intelligence.)
From TikTok to Instagram, the influencers are everywhere. The fast car. The nice clothes. The flashy watch. All from flipping homes.
Unfortunately, these videos rarely ever cover the harsh realities of real estate—especially when it comes to the profit margins for flips and other real estate businesses.
That’s why we’re here. Today, we’re shining a light on reality to demonstrate just how difficult this industry can be.
How Do People Actually Make Money Flipping Houses?
As people who have actually flipped homes in the past, we’ll tell you the truth: Flipping houses isn’t nearly as glamorous as social media influencers would like you to think.
A big reason is the “rule of thirds” in investing. Basically, the rule says you should purchase, invest, and profit at the same amount.
So, for example, you might buy a home at $100,000, invest another $100,000, then sell at $300,000 so you can profit $100,000.
But it rarely works that way. A few reasons:
1. Your expenses are way larger than you think. Closing costs, realtor fees, and taxes all cut into your profit margins. A $100,000 profit could dwindle to less than $80,000 after you pay everyone else.
2. There are always unexpected costs. Homes are unpredictable, and some expenses—like fixing a broken sewer line—can easily cost $10,000–$20,000 or more. Suddenly, that $80,000 drops to $60,000 (or less).
3. Time is valuable. Another consideration: How much time did you spend on the project? If you can profit $60,000 in only two months of work, that’s incredible! But if it takes all year to sell the flip, that’s a long time to go without a paycheck from your labor (unless you’re only working on the flip part-time).
And if you hire a handyman or construction team to assist in your repairs, they’ll eat an even bigger home into your profits! We know of investors who buy and flip homes all over Pittsburgh, but they’re constantly fighting with their construction team not to make things “too nice.” They can’t afford to make beautiful homes when they’re trying to protect profit margins
Everything slowly works against you to eat away at your profitability.
I still remember when my brother, Tom (of Bern Construction—check out our interview with him), started off flipping homes. He slept on the floor inside these dilapidated houses. It was unglamorous and humbling, but he had the patience, ability, and flexibility to live that lifestyle until he built up a portfolio and started his construction company.
All of this has led us to this humble formula:
Flip Profit =
Final Sale Price -
(Purchase Price + Planned Expenses + Unplanned Expenses + Taxes + Services)
The Challenge of Flipping Homes In Pittsburgh
Most of those flashy real estate “influencers” you see flipping houses on social media aren’t working in the Pittsburgh area.
That’s not to discredit Pittsburgh in any way—we love it here! (Pittsburgh is our chosen home, and we’ve dedicated plenty of time and effort highlighting the wonderful neighborhoods in our city.)
But the housing stock here is different. Most homes are 60+ years old. Thousands of abandoned homes strewn across the city are blighted. Moisture, sewer problems, and electrical issues are nearly universal in our older housing stock.
When you flip, you have to make some tough choices (To fix or not to fix?), and each choice has an economic benefit and drawback—which is why it’s so challenging to flip in the Pittsburgh market if you’ve never done it before.
The Secret Life of A Flipper
The unfortunate reality is that most professional flips are happening at scale—by money-backed organizations like the investors we mentioned earlier. Oftentimes, these investors are flipping the house just so they can hold the property and charge rent, creating a steady income stream in the process.
If you’re not a corporate-backed investor, there are a couple of ways you can successfully enter the market as a flipper:
1. Focus On Small Projects: One strategy is to buy a relatively nice house that only needs one or two easy-to-tackle projects. Move in, make the repairs, and build a little equity before moving out. Your project becomes more of a part-time project, and the approach allows you to make safe investment decisions that will likely pay off nicely when you resell the house.
2. Treat It Like A Renovation Project: Another strategy is to start by “flipping” your own home. Use your own house to learn the ins and outs of construction, the cost analysis of different projects, and the different ROI of projects like renovating a kitchen versus renovating a bathroom.
With this approach, you’re really thinking about your home with two owners: you, who’s currently living there, and the future owners who will purchase the home after you. Everything you do should be to accommodate, impress, and attract those future buyers.
In fact, that’s exactly how we approached our first few houses before moving to Swissvale. Every decision we made was with this important question in mind: How will this positively impact the resale value of this home?
How to Actually Make Money In Real Estate
Let’s be real: It’s not just the house flippers on Instagram who give the real estate industry a bad name. We also see property managers, fellow agents, and other industry insiders who flex extravagant wealth and call themselves “influencers.”
Of course, many of these influencers aren’t as successful as they make themselves look on camera.
So, where can you make money?
1. Be Practical With Your Purchases. A great way to get started (even in the Pittsburgh market) is to buy a duplex.
Live in one side, and rent out the other side to a friend or family member who you’re confident will care for their unit and pay rent on a regular basis.
As you fix up the property, you can gradually dig into the rent profit (which can also help cover your mortgage). Eventually, as you earn more equity, you can leverage that property to purchase another duplex—and continue renting out the units.
Eventually, you can build a solid portfolio of rentals.
Fair warning: It’s not as easy as it sounds. There will always be surprise issues. A water heater could fail, a tenant could leave unexpectedly, or a major roof leak could set you back thousands of dollars.
2. Be Ready to Work. People often mistake the real estate industry as an opportunity to make quick, easy money, but that’s really not the case.
In fact, the majority of real estate agents fail in their first year—and we’ve seen sources say a shocking 75% of real estate agents leave the industry entirely in their first year.
It’s the same no matter what you decide to do. Whether you decide to sell houses, invest in houses, flip houses, work in construction, or manage commercial real estate—it’s all challenging. Between complicated legal requirements, steep tax rates, and fierce competition, it’s a challenging industry to be successful in if you’re not willing to put in the work.
Those who market themselves effectively, network regularly, and develop new skills are much more likely to see success over their peers who are only getting into the industry to make a quick buck.
Find Additional Support
If you’d like to learn more, contact us. We always love talking about real estate, regardless of whether you’re looking to invest, buy, or sell.
Cheers,
J&T