By Ethan Roberts, Writer
This post is the first in a two-part series about women in real estate. Click here for part two.
Since the early 1990s, real estate investing has become more and more popular as a way for average Americans to gradually build wealth over time. But for many years, this type of investing was almost exclusively the domain of men, while women gravitated toward the “helping” aspects of the industry, such as becoming real estate agents. As of 2013, a little more than half of all Realtors were women, according the National Association of Realtors® (NAR).
But in recent years, women are being drawn toward real estate investing as a viable way to ensure that they will have income or appreciating assets in retirement. Today there are even online investing clubs devoted exclusively to female real estate investors.
Women have a lot to gain. Real estate investing, with its potentially high returns, offers them an excellent way to boost their income streams throughout their lives. This can be especially important in retirement, since women are at a greater risk of outliving their savings due to their longer life expectancy, fewer years in the workforce, and smaller paychecks.
Flipping Homes for Profit
Some women real estate investors are making money on “flipping,” where they buy homes in distressed condition, and then resell them within a short period of time. One way to do this is to buy an inexpensive property through a county foreclosure auction, and then “wholesale” it to another investor at a bargain price, without making any repairs or improvements.
Their goal is simply to earn a $3,000 to $6,000 profit on each wholesale flip. By wholesaling one or two homes per month, they can build outstanding wealth, or create an excellent cash flow for their retirement years.
But many women also “retail” the home—which refers to the practice of repairing or improving the home’s structural and cosmetic flaws in order to sell it as a primary residence for full market value. This takes longer and the process is more involved, but the profit potential greatly exceeds wholesaling. Profits on a retail flip may range from $15,000 to $50,000 or more, depending on the price paid, amount of work needed, and ultimate selling price.
One woman leveraging this strategy is Leticia, a 53-year-old divorcee who lives in Jacksonville, Fla., with her two children, one in college and the other in high school. She started flipping homes in 2004 as a way to make some extra money. Her first project was moving mobile homes away from an area being taken over by an airport under eminent domain.
When she first began, she knew nothing about the process. But slowly, over time, she’s learned much more, to the point where she’s able to project manage the entire flip.
To date, Leticia has owned and sold six primary residences. She even helped design two of them and managed the contractors performing the work. She also does some of the work herself on flips, such as painting and landscaping, as well as ordering and buying materials.
Flipping homes isn’t just a hobby for her—it’s her full-time job, and she uses a “hard money” lender to finance the deals. A hard money loan is a short-term, very-high-interest loan (12% to 15%), in which the lender provides about 65% to 70% of the after-repaired value (ARM) of the home to the borrower. For example, if a foreclosed home is worth $150,000 after repairs, and is selling for only $100,000, a hard money loan would finance perhaps 70% of the $150,000, or $105,000.
While the investor might have to pay for materials and labor out of pocket, they use hard money loans so they don’t have to come up with a 20% down payment, as is usually required with other types of conventional loans. The idea is to fix up and sell the home fast, so the high-interest loan can be paid back as quickly as possible.
For Leticia, the biggest challenge in flipping homes isn’t financing: It’s having basic electrical or plumbing skills—or not having them, as the case may be.
“I’d like to be able to install ceiling fans, sinks, or change faucets myself, but I wasn’t taught how growing up,” she says. “I often have to hire people to do these tasks, and that reduces my profit on the house.”
However, she doesn’t let her physical size stop her, finding ways to move heavy rehabbing materials, like 40- to 50-pound boxes of ceramic tile, that would even be difficult for many men to lift. “I just lift one box at a time and go slowly,” she says.
Leticia’s long-term goal is to achieve financial independence so she doesn’t have to return to a 9-to-5 job. She hopes to flip five to six homes per year, and make a $20,000 minimum net profit on each. That can be challenge in itself, given the nature of the property she’s buying. For example, hidden plumbing problems have caused her to go over budget on her most recent project, a 1,500-square-foot ranch home in Florida that was a bank foreclosure.
“Luckily, I was able to find some great deals on cabinets and granite countertops,” she says. “And home values have risen since I bought the home.” In fact, within three days of listing the home on the Multiple Listing Service, Leticia received a contract for sale.
Leticia suggests that women interested in real estate investing “shadow” other investors to see what they do. “Also, read books and have a keen interest in learning everything you can about real estate,” she counsels.
With a fast contract in hand on this home, Leticia is already looking forward to searching for the next potentially profitable “flip.”
Next Up: Women Build Long-Term Wealth as Landlords
Resources:
Real Estate Investing from A Woman’s Perspective (Toronto), Meetup.com
“Real Estate Investing is No Longer a Private Club,” Forbes.com, April 2, 2014
“Real Estate Investing, It Isn’t Just for the Boys Anymore,” Huffington Post, July 12, 2013
“Women Investing in Real Estate,” NuWire Investor, January 22, 2008
Field Guide to Quick Real Estate Statistics, National Association of Realtors®
Ethan Roberts is a real estate writer, editor and investor. He’s a frequent contributor to InvestorPlace.com, and his work has been featured on Money.msn.com and Reuters.com. He’s also written for SeekingAlpha.com and MarketGreenhouse.com, and was one of five contributing editors to TheTycoonReport.com. He’s been investing in real estate since 1995 and has been a Realtor since 1998. He also teaches classes on investing in residential real estate.
