Over the years, I have had a number of great house flips, but I have had some bad ones as well. I have made some big mistakes, and I have also had some uncontrollable issues come up that cost me a lot of money. While I never like to lose money on flips, I always learn something that can help my business in the future. On this episode of the InvestFourMore Real Estate Podcast, I talk about my worst flipping experiences, what I learned from them, and how they helped my business.
How risky is house flipping?
I have flipped over 130 houses and will come close to flipping 30 this year alone. With all of those flips, I think I have lost money on fewer than 5 houses. In fact, on a couple houses, I lost less than a couple thousand dollars. While house flipping can seem very risky, if you know what you are doing it can be a great business to be in. I average about $30,000 in profit on each of my flips, but you have to know your numbers very well. I think most people get into trouble with flips because they:
- Overestimate what their house will be worth once it is fixed up.
- Over-improve the house for the neighborhood.
- Underestimate how long a flip will take.
- Underestimate the total of all costs.
If you know all your numbers, you will do just fine on your flips 95% of the time.
What are the biggest lessons I have learned from flipping houses?
Over the years, I have learned many things, mostly because of mistakes I have made. Those lessons have helped me flip more and more houses while reducing stress and making more money. Here are the biggest lessons I have learned:
- I do not do any of the work myself. I used to think I would save money by painting or doing other work. I was wrong! It took me longer to do the work than a professional, and it took time away from other activities I could be doing that would make me much more money.
- I have to keep very close tabs on all of my contractors. Some of the biggest disasters I have had were from me not checking on my contractors often. Some disasters have also come from me not firing my contractors soon enough after they show signs they are not the right person for the job.
- I have to be very hands on when I hire people. I love to hire people to free up my time and grow the business. However, I cannot simply hire someone and expect them to know exactly how I want the job done. The more time I spend training someone in the beginning, the better that person will be at their job and the less time I will spend working with them later on.
- I have learned how to spot drug houses! I bought a meth house once that ended up burning down. You can hear all about that story on the podcast. If I would have known what to look for, I would have known that was a drug house before I bought It.
- I have learned that everything takes longer and costs more. I can spend hours estimating how long a flip will take and how much the repairs will cost. I am almost always wrong because unknown issues pop up. A contractor could have issues, a repair we did not know about may need to be done, or a house may be put in a flood zone that was not previously in a flood zone! I always assume things will take longer and be more expensive than I think.