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Another Case of Flip this House Syndrome | A Little Help Flipping Houses

by Joshua Dorkin on March 22, 2007 · 8 comments

  

flipping housesI realize that the title of this post is a bit cryptic, but it will soon make sense to you. We’ve all heard of the shows: Flip this House, Flip that House, Property Ladder, and I’m sure there are even more of ‘em out there.

These shows romanticize the act of rehabbing properties and selling them for profit. I haven’t seen one episode of any of them where someone really screws up and misses their timeline or budget. Flipping houses is easy! Just get a contractor – rip some walls out – put in new floors – paint the walls – do some cheap landscaping – and BAM! You’ve made tens, if not hundreds of thousands of dollars in only 14 days!

The reality of this reality is that it is not that easy, especially for a beginner. People understimate budgets, contractors dawdle, weather comes in, wood has termites, and one of a huge list of problems inevitably occurs. Think its easy, learn from Minna:

A Case of Flip This House Syndrome

I must have been smoking some serious crack when I thought I could wrap up this “cosmetic ” first rehab in 3 weeks for 12k…Complete la-la-land. Almost twice that much and twice as long later, I’m still not done, and it’s starting to get to me. I had a credit card denied for the first time in years today, and I started freaking out. I am getting pretty maxed. I also have no income. It’s not horrible, terrible yet, but I’m starting to feel the pain here. I really need to wrap this rehab up, and get it sold in a hurry. Really I do. IN A HURRY. Anyway…just had to vent a little.

Sounds pretty crazy, huh. This is not an isolated story. Every day flippers spend their last dime and have to stop working on their properties. Every day, another potential profit becomes hell on the pocket.

What can people do to prevent this, Flip this House Syndrome?

That is a fairly easy question. The key is education and planning! Even the simplest “cosmetic fixers” can fast become huge projects. Here are a few basic budgeting tips to get you going:

  • Budget your holding costs for the property and add at least a month or so. This includes mortgage, insurance, taxes, etc. Be realistic about your timeline. Realize that you will not work as fast as professionally trained contractors. If you think it will take you a week to do something, plan for a few weeks. Be safe in your estimates!
  • Break down your project on a room by room basis, and then break it down some more. Looking at the entire space oftentimes makes people think there is not a lot of work, but when you get to the nitty gritty, you’ll often find much more then you bargained for.
  • Imagine the worst of contingencies (termites, mold, etc) and budget for them. I can’t tell you how often I hear about investors who had just enough money to get everything done, but they ran into some mini-disaster and had to stop working.

If you can’t afford to get into the project after taking these into consideration, STAY AWAY!
If you’ve never rehabbed a property, talk to someone who has!
If you think it is going to be easy — go back to your desk job!

That said, if you want to learn how to make money flipping real estate, check out our free rehabbing forums!

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{ 8 comments… read them below or add one }

savvy March 25, 2007 at 8:56 am

There was one show that did have episodes where people lost a ton of money, but I can’t remember the name of it. I don’t think it’s on anymore. I remember one episode in particular where one member of the couple quit their job to renovate an “investment”. Their holding costs were huge and after about three months they couldn’t finish renovations and they were behind in payments on their primary residence. At the end (the investment property still wasn’t sold), they were still saying there wasn’t anything they’d do different. No idea how it turned out.

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Athol Kay March 26, 2007 at 5:43 am

The biggie is that you can’t rely on the market to increase to create the profit from the flip. The flip has to make sense economically even if the market holds steady or even drops a bit.

And actually selling the house is a different skill set than fixing the house up. I mean I can sell houses, but really only useful for demolition tasks once holding a power tool. At least the flip shows generally show the flipper using an agent to sell the house. Newbie Flipper + FSBO = uh oh.

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2 BROS BLOGGING May 17, 2007 at 10:14 pm

This is a tough biz. I’m in the process of a flip right now. My initial budget was $12k, it’s at $25k now and its been 4 months!

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KL August 7, 2007 at 6:01 pm

Hey, I live in the Ct area and I am an investor. I watch those shows non stop and I can tell you that there is a lot of money to be made by flipping real estate. The key is learning to find distressed properties and then having an exit strategy which allows you to maximize your profits. On my fist flip I made over 40 thousand and it took less than 2 months.

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J. Shields September 3, 2007 at 6:59 pm

I love all the flipping shows I am currently researching info on flipping. I know several people personally who do this. The thing is for beginners go cheap. Buy houses in cheaper areas where you can get a good deal fix them and do not flip…. rent. Increasing your net value is the best way to get into this without having much money. And if you fail you won’t be homeless or in debt it is much easier to sell a cheaper house than an expensive house. Some people may not agree with this way but I have peronally seen sevaral people get into high end flipping by starting this way.

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Investment Property December 19, 2007 at 8:22 am

I definately agree on the glamour part of property flipping to make the show more watchable. I am based in the UK and we also have the property ladder and many many more, in fact too many of these shows,

As times have changed i.e the glamour taken out of the property market with the recent troubled times, we are begining to see one or two more realistic shows where they offer more constructive criticism of wannabee developers, which in fact is even more entertaining.

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adverse credit mortgage June 20, 2008 at 10:47 am

Talking about such programmes in the UK, i was watching a programme a week ago, that was finally attempting to give people a true perspective of the proeprty investment and house flipping business. The presenter ventured to buy, renovate, and flip a property in this current market to prove that times are not so rosy anymore.

Its about time reality hit us, but the only problem is that we stil have repeat editions of these programmes being aired that were recorded when th property market was rising.

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Mansfield January 22, 2010 at 9:21 am

LOVE this article. You make so many valid points…its so annoying to me to see all those reality shows..esp the ones that misinterpret the hard work that goes into house flipping.

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