Why Flippers Fail

Epic House Flip Fail?

It happens to the best of us. Mistakes are made, time and money are lost. A bad flip. But don’t feel too bad; even pop star Ricky Martin had a failed flip in 2010. Guess he wasn’t Livin’ La Vida Loca that year. But how can you as a part time real estate investor stay out of the pitfalls? Let’s talk a little bit about why flippers fail.

Here are our top five reasons why we feel new house flippers fail.

1. Paying too Much

We know that you are excited when you get that first deal. Keep in mind that first flip can set the tone for your flipping career. While the first flip is a learning experience, you must do your research to make sure you know what you are getting into. Check out the neighborhood yourself or have your realtor work up comps for you. Over paying for a property will not leave you in a good situation. Don’t let a loss for a brand new investment business could be too hard to overcome.

2. Lack of Planning

We say this in about every blog: Have a system and stick to it. Jumping ahead in the flipping world with out laying out your strategy is not only dangerous it could ruin your flipping adventure. Having a system and using tools like your Property Repair Estimate Sheet will keep you organized and have an idea how the flip is going to turn out. Without a system, a flip could turn into a disaster.

3. Not Supervising Contractors

While we encourage part time flippers to hire contractors to keep the bulk of the work off your own shoulders, don’t forget to supervise. Often, first time flippers think that all they will have to do is hire contractors and then they can go back to their day job and not check in. So much can go wrong if you do not check in on how the contractors are doing with your Scope of Work (SOW). Let the foreman know if he is to make decisions on the spot, or should a contractor contact you first. Keep in mind that not all contractors have the same morals and values as Tim the Toolman Taylor. With out supervision, they could drag their feet getting the work done, take 3-hour lunch breaks or actually be doing another job while they are supposed to be doing yours.

4. Unrealistic Timeframes

This mistake can be avoidable if you educate yourself on how long it actually takes to complete a flip. How busy are you? How busy is your contractor. What is the market like in your farm area? A good rule of thumb to follow from Bigger Pockets: Give yourself six months; plan all your carrying costs and expenses for 6 months, then work towards getting it gone in three to four months depending on the extent of work needed.

5. Over Improving

Don’t make this mistake. Don’t rehab the home the way you would like for it to be. Don’t pick out designer tiles or trendy paint colors. Remember you are trying to appeal to potential home buyers, not your personal taste. Yes the marble counter tops will really look nice but an upgrade like that could price yourself right out of the neighborhood. Neutral options that are comparable to other homes in the area will best serve you to sell the house.

Read more about this at Bigger Pockets, a social network for the real estate investing community.

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Erik Hitzelberger has been Real Estate Investor since 2007. While learning the ropes in the market down-cycle, he now teaches others how to use his systems and leverage other people’s expertise to achieve their own goals.

Erik Hitzelberger – who has written 194 posts on Part Time REI.

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