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9 Mistakes I’ve Made Flipping Houses

Flipping Houses

 

The following is a guest post from Brandon Turner at Biggerpockets.com. If you would like to submit a guest post, please contact me.

I want to make a confession.

I’ve made some pretty big mistakes in my life.

But who hasn’t? However, it’s learning from those mistakes and helping others avoid them that makes those mistakes worth making. So consider this post my atonement!

You see, I’ve flipped about a dozen homes over the past few years – some with success and some with … well… a lot of “education”. It’s not that I lost any money, but some of the small profits I made early on were not worth the headache or the time spent. I know this is the case with many house flippers, so in an effort to help those looking to get into this (potentially lucrative, but often risky) field, I’ve compiled a list of my top ten mistakes I’ve made when flipping houses.

1.) Doing all the Work Myself

The first several flips were remodeled nearly 100% by myself and my wife, during the weekends and evenings. We painted, we cleaned, we carpeted, we installed, we wept. It was a long flip, and while I learned a TON about the rehab process, looking back I should have been sure to include the cost of hiring contractors into the deal and worked harder at being “the manager” and not so much “the labor.”

2.) Buying the Wrong Property Characteristics

There is no “magic” property size, layout, or ratio of bedrooms vs. bathrooms to make a flip sell automatically. However, there are better and worse property characteristics that work better in YOUR area. Talk to local real estate agents to determine what kind of house sells better in your area. Do 3 bedroom, 2 baths sell the best? (They usually do?) How about condos? Or homes with garages? Find out what the buyers in your area want to buy – and flip that house.

3.) Not Noticing the Neighbors

The condition of the neighbor’s house can make or break a deal. I once bought a small two bedroom house (mistake, see above!) that was the ugliest house on the street – by far. It was disgusting. It also shared a driveway with a neighbor, which we didn’t think was such a problem. However, once the flip was completed – the house next door was now the ugliest house on the street, and made selling much more difficult. It didn’t look so bad when it was next to the ugly house, but next to the remodeled house it suddenly became an eyesore.

4.) Underestimating the Time

By far, one of the most common mistakes made by nearly every house flipper is the estimate on how long it takes to remodel a house. I’ve been guilty of this most of my flips, as the logic of how long a project should take never seems to jive with the reality. For example, if it takes 3 days to paint a house and 2 days to carpet – logically that should take 5 days. Nope! It will take 2 weeks! Eventually, I was able to shave off time and make my flips fit within the allotted time, but it’s not easy and requires systems and an efficient manager.

5.) Underestimating the Budget

Another very common mistake made by most house flippers at the beginning is underestimating the cost of the rehab. Again – logic doesn’t always match with reality, and the little things add up so quickly! A good rule of thumb for new house flippers: always double your budget and double your timeline. If it still works when analyzing the property: move forward. If not – find a better deal.

6.) Making it “Too Nice”

TV has wrecked us. We watch those flipping shows or remodeling shows on HGTV and want our flips to look just like that. I’ve been guilty of this on several projects, where I simply made the house “too nice.” Sure, the buyers appreciated it and it may have sold quicker than other properties, but the extra costs spent were never recouped. The best way to determine how nice a property should be is to look at the comparable sales. What are people buying? What do your local buyers want in a house? Then, seek to go just one step above that. If your local buyers only buy houses with granite counters – then you must put in granite or another stone counter. However, if laminate counters are sufficient, don’t upgrade to granite and stainless steel unless the competition is.

7.) Paying too Much

This one is easy to do, because of the emotions that go into buying a property. It’s so easy to simply look at the house and imagine the potential, but forget the actual deal. I’ve done it – it’s not good. Stick to your guns, trust your numbers. Math never lies. Just be sure that your estimates are on target!

8.) Hiring the Wrong Contractors

You know that one friend of yours who keeps hooking up with that jerk boyfriend, breaking up, hooking back up, breaking up, over and over and over? You want to just scream at them “stop it! Get away from them!” This is my story with using the wrong contractors. After I quit doing all the work myself, I began to find others to do the labor for me. However, I went about it the wrong way. Over and over, on many of my flips I wanted to help out my contracting friends so I used them to remodel the properties. The only problem: they weren’t very good contractors! Choosing a contractor that could actually do a great job, within budget, and on time is vital to the success of your company.

9.) Not Having a Back-Up Plan

Flipping a house and selling it quickly for a lot of profit is the goal. However, if that is the only plan you’ve got a problem. I learned this lesson early on in my flipping, as I found myself with a market that was quickly falling and I couldn’t sell. What was I to do? All I had planned for was selling!? After a lot of discussion and debate, I ended up renting the home out and refinancing into a 30 year fixed mortgage. This experience taught me two things:

  1. Rentals are an awesome way to build wealth (the tenant is still paying down my mortgage each month.)
  2. You HAVE to have a back-up plan (multiple ones!)

Conclusion

Clearly, I’ve made a lot of mistakes. However, as I said earlier – those mistakes just might be totally worth it if I can help others avoid the same. It’s my hope that if you decide to flip a house in the future, or engage in any other kind of similar business, that you can shorten your learning curve by avoiding the mistakes I’ve made.

Let me know if you have any questions or comments on this stuff by leaving me a comment below!

Brandon Turner (G+) is the senior editor at BiggerPockets.com, the real estate investing social network as well as the co-host to the popular BiggerPockets Podcast. He enjoys writing epically in-depth articles, like The Ultimate Beginner’s Guide to Real Estate Investing or the Ultimate Guide to Tenant Screening, which you can read here.

Image Credit: Freedigitalphotos.net

About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.

31 comments

  1. Most of these apply if you’re rehabbing a place as a rental, too! A list of good contractors is as good as gold, and we’re slowly building up our list. But it takes time to figure out which business cards are really worth keeping your your rolodex.
    Mrs. Pop @ Planting Our Pennies recently posted..He Said She Said: One Year Of BloggingMy Profile

  2. We’ve flipped a few houses and I’ve done almost all of these things at one point or another! But, oh well, you live and you learn, right?

  3. I have not flipped a house and it really comes down to it being something I really have no education/knowledge about. That said, these all seem like great tips…especially #1.
    John S @ Frugal Rules recently posted..Online Brokerages I’ve Used: Etrade ReviewMy Profile

  4. You “mistakes” are the exact reason why I don’t want to get into house flipping. There are too many things that I don’t wan to have to control. Nice breakdown Brandon.
    Grayson @ Debt RoundUp recently posted..Out of Sight, Out of Mind: Debt Doesn’t Play That GameMy Profile

  5. This is all good to know! We have thought about getting into the business of flipping houses.
    Michelle recently posted..Pursuing What I Love or What Brings in the (Stable) MoneyMy Profile

  6. There is a presumption that flipping homes makes a lot of money otherwise why do it. I owned a lot of income property and did very well, but it was hardly an easy ride.
    krantcents recently posted..Are You a Genius or a Fool?My Profile

  7. I’ve always admired people that could do that, especially when you have the time, skills, and patience to do a lot of the work yourselves.
    Budget and the Beach recently posted..My Perspective on FreelancingMy Profile

  8. Thanks so much Kim for letting me post this! I really appreciate the opportunity to maybe save someone else some of the stress I’ve faced!
    Brandon Turner | BiggerPockets recently posted..How To Take Your House Flipping Education To The Next LevelMy Profile

  9. These are all great lessons to learn. I haven’t ever been a part of a house flip before, but my buddy and I have defnitely thought about it. Hopefully if we ever do flip a house we’ll be able to learn from your mistakes so that we don’t have to make them ourselves.
    Jake Erickson recently posted..5 Fun and Frugal Summer ActivitiesMy Profile

  10. As someone who is interested in flipping or renovating and then renting real estate, I really appreciated this post. HGTV has certainly ruined us as well! Before selling this house, we do plan on putting in hardwood floors, new windows, renovating the bathroom, kitchen, etc. and we could EASILY make it “too nice” and never recoup the expenses. Here’s to hopefully taking your advice and not making the mistake ;)
    DC @ Young Adult Money recently posted..How I want to make money – an overview and analysis of various ways to generate incomeMy Profile

  11. All excellent points. I’ll let you know after I do my first flip if I was able to learn from your mistakes. :) Thanks Brandon.

  12. Underestimating time seems to be a common lesson learned. There always seem to be new time sinks popping up. Great insight here.

  13. Great post! I would never have the skills or patience to flip a house. Some of this can apply to buying too – like noticing your neighbours and what they are like!
    Cat recently posted..How to access online courses for freeMy Profile

  14. Been there on the neighborhood. I was also too lazy to go into the HOA’s accounts in depth and they were deep in debt with a high ratio of owners not paying their dues.
    Pauline recently posted..4 Mistakes I Made When I First Started InvestingMy Profile

  15. Great list.

    I keep learning the value of farming out the work to others instead of doing it myself.

    Even though I have a list of contractors on my speed dial list, I still catch myself wanting to go it alone on repairs.
    Terry recently posted..Our First Rental House PlungeMy Profile

  16. I have never attempted to flip a house simply because of the reasons you listed. I am 100% sure that I would make most of them and end up losing money in the process.
    zimmy@moneyandpotatoes.com recently posted..Outlet Vs Retail: The Great Shopping DebateMy Profile

  17. Haim Mamane Palman

    Great post Brandon. I had to learn the hard way that hiring the cheaper contractor was a big expensive mistake. Always use referrals from other investors that do what you do. Lesson learned.

  18. Great stuff here! We often think about getting into real estate, so we appreciate your advice – thank you, Brandon!
    Laurie @thefrugalfarmer recently posted..TwoFer: A Great Holiday Recipe and a Serious Word of CautionMy Profile

  19. Wow, great tips, as this is something I am VERY interested in the next few years. I’ll start asking around about contractors, because I hear that is the BIGGEST possible roadblock to a successful flip!
    Jacob @ iHeartBudgets recently posted..Ultimate Budget Series: Part 1 – IncomeMy Profile

  20. I have always wondered about flipping houses. After reading this post it looks like a lot of hard work. Good post
    Kevin Watts recently posted..Should I Live in a Dorm or Outside Residence?My Profile

  21. Thanks for sharing this. I presume you need to know the numbers and know them well. The last thing you need is to pay too much for a house and you lose money rather than make a profit. Hiring the right contractor to me is vital as well. Why would anyone want to risk a big investment and potentially a bigger profit to someone who is less than stellar at their trade.

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