It’s hard to believe that my wife Christina and I have been flipping houses for a living now for almost ten years. It doesn’t seem that long ago that we found ourselves living in a rented apartment – complete with a roommate – feeling pretty sorry for ourselves because we’d just sold our big house after the market crashed and our business as real estate agents took a nosedive. Fortunately, those days are long gone and today we live in an even bigger house with more cars and toys and garage space than one man should own! And it’s all thanks to house flipping.
Still, I’ll be the first to tell you it hasn’t always been smooth sailing. I’ve made more mistakes than I can possibly remember. In a weird way, I’m grateful for them because if we hadn’t made them, we wouldn’t be where we are today.
Still, there are a handful of big ones that really stand out, and if sharing them with you means you get avoid them, I’m all for it. Alright, here goes.
1. Paying Too Much for a House
The first most embarrassing mistake is paying too much for a house. Yes, I know this is rookie mistake 101, but sometimes emotion takes over and kicks logic out. There have been more than a couple of times where I’ve ended up paying too much for a house, usually due to some unforeseen major issue, such as a structural problem or extensive water damage or mold. Bottom line – know your numbers, stick to them, and always account for Murphy’s Law to kick in.
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2. Hiring Cheap Contractors
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The second most embarrassing mistake is hiring the cheapest contractors. I learned this painful lesson on our very first flip. I called up a whole lot of contractors, thinking I was doing the smart thing, got them all to bid the job, and then picked the one who beat out the others with the lowest price. That mistake cost me four months in renovation time, more money than it would have cost to hire the right guy in the first place, and a lot of sleepless nights. Don’t choose a contractor based solely on price. Find the best you can afford and build a relationship with them. Good contractors make you money – they don’t cost you.
3. Getting Attached
We made the mistake of falling in love with a flip. Especially when you’re starting out, it can be really tempting to start renovating it for your tastes, and you start justifying some big purchases because you tell yourself, “Well, if I was living here, that’s what I’d want.” Don’t do it. It’s a slippery slope. Before you commit a penny to your rehab costs, make sure you’ve done your homework to find out what buyers expect for a house in that price range. Granite countertops might not be necessary, but it might be essential that your kitchen has stainless steel appliances. Be smart and be strategic about how you invest your money.
4. Not Accepting Help
Don’t pretend you know everything. Learn from the pros and you’ll get to your goal much quicker. All right, I’ll admit it. This was a tough lesson for me to learn – I had to get beaten up on price a lot before I admitted that there must be an easier way to flip houses. That’s when I started to get really serious about my real estate education. I enrolled in practically every real estate investing seminar I could find. At times, it felt like I was drinking from a fire hydrant with all the great information I got, but that time and money investment has given me a huge ROI.
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5. Having Only One Strategy
Don’t go into a deal with only one exit strategy because things often work out a lot differently than you think they will. I’ve had a number of deals where I’ve thought we were going to make some fast cash by flipping a house, but the market had other ideas, so we did a lease-to-own, or a rental, or wholesaled it and moved on. Whenever you’re doing the numbers on a property, make sure that it supports at least three different exit strategies. That way if things don’t work out as you hope, your plan B or plan C can kick in and you’ll wind up with a deal that’s got some good profit in it.
Well that about sums up some of our biggest flipping mistakes. I hope you can learn from these when you’re structuring your own deals, but if you don’t, remember that being successful doesn’t mean you don’t make mistakes. It just means you move through your mistakes quickly and learn from them so that next time, you’re that much wiser.
Note: This is a guest post; the views and opinions expressed are those of the author and do not necessarily reflect the opinion or position of Redfin.
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