3 Reasons Beginners SHOULD NOT Flip Houses

by | BiggerPockets.com

New investors seem to really love the idea of flipping houses. (Thanks, HGTV.)

And I get it. It seems glamorous. It seems simple. It seems like it all happens in a snap.

But “seems” is the keyword here.

While I do understand the appeal—I’ve done dozens of fix and flips myself—here’s a little forewarning.

Far too often real estate newbies are shocked to find out the process is not at all like what you see on TV.

There are dozens of ways to invest in real estate. This just happens to be one I wouldn’t recommend starting out with, and here’s why.

Related: Fixing and Flipping: It’s a Numbers Game

Hold Off on Flipping if…

  1. You’re working alone. Fix and flips require a team!
  2. You don’t have extra money. Fix and flips often introduce costly surprises!
  3. You don’t know the market well. Choosing a good location is key!

Of course, there are a million reasons you should be flipping, but find out why these three elements can quickly turn a fix and flip into a project gone wrong.

Are you planning to do a fix and flip? Or have you done it already? What’s your take on the process? 

Let me know in the comment section.

About Author

Matt Faircloth

Matt Faircloth, Co-founder & President of the DeRosa Group, is a seasoned real estate investor. The DeRosa Group, based in historic Trenton, New Jersey, is a developer and owner of commercial and residential property with a mission to “transform lives through real estate." Matt, along with his wife Liz, started investing in real estate in 2004 with the purchase of a duplex outside of Philadelphia with a $30,000 private loan. They founded DeRosa Group in 2005 and have since grown the company to owning and managing over 370 units of residential and commercial assets throughout the east coast. DeRosa has completed over $30 million in real estate transactions involving private capital including fix and flips, single family home rentals, mixed use buildings, apartment buildings, office buildings, and tax lien investments. Matt Faircloth is the author of Raising Private Capital, has been featured on the BiggerPockets Podcast, and regularly contributes to BiggerPockets’s Facebook Live sessions and educational webinars.

17 Comments

  1. Tom Phelan

    One huge unknown is the condition of a sewer. I purchased an older brick construction fix and flip and the inspection included the cursory plumbing inspection of flushing toilets and turning on water faucets.

    Once the major rehab was completed we flipped the house for about a $30,000 profit.

    Problem was once the family who bought the home moved in and all three teenage kids were showering, mom was doing a load of wash etc. the sewer repeatedly backed up.

    We tried to locate the problem but could not until we send a camera down the sewer system and guess what. Yep, about fifty feet out and under a neighbor’s concrete garage floor was a sever break. The neighbor’s house and garage were built after the home I purchased.

    The City said the remedy was simple, just reroute the sewer to another street about a 1/4 mile away and at a cost of $25,000.

    My point, if you ever buy an older home or one that has been abandoned for a long time, bite the bullet and pay to have a camera run down the sewer line.

  2. Michael Glatter

    I personally experienced this. I bought a home in down town San Antonio, and spent a year flipping the property by myself. I hired a few jobs out, but mainly did most of the work myself. Flooring, demoing a wall to build a laundry room, updated electrical, new plumbing, adding windows, demolishing structures in the back yard, central A/C, french drain, etc. I put $20k plus into the property and it still needed a lot of work.
    If I could do it over again, I would get a turn key property that was ready to rent immediately. While I am negative on the property now, I’ve commited to buying and holding. The growth of the city and the location should put me on top at some point in the near future, and I had a really nice appraisal after the purchase of the property. I will probably be really happy that I got the property 10-20 years from now but LESSON LEARNED!

  3. Kysa Cronrath

    Thank you for this brief but wisdom-packed article. Ironically, I did my first live in flip – which was also my first venture outside of renting – when I was single and didn’t have any money (thanks to a Civil Engineering degree and epic piles of student loans). I put in a little less than $3,500, lots of manual labor, and came out of the deal with $36,000 cash to promptly squash a huge chunk of my remaining student debt.

    I completely agree that a team and some background knowledge of the market and construction is crucial. Even though I was single, I had an excellent real estate agent who has also invested in roughly 10 condos/rental units (thanks Dave for talking strategy and fielding so many questions), a few friends willing to rent my ugly spare bedroom to help with my cash flow situation (Megan and Amanda, you’re angels), a stellar HOA, and a family who graciously helped with many a painting party or trip to the ding-and-dent center on the hunt for discounted appliances or a DIY bathtub resurfacing project. I had the A-Team beside me even though it wasn’t in the form of a spouse or business partner!

    I also felt fortunate to have a background in construction (cue that expensive Civil Engineering degree), and I borrowed some tricks of the trade: three quotes system for work I had to hire out, creating a detailed project budget with healthy contingency, defining a clear scope & schedule, having a list of trusted emergency contacts (especially those of the local utility providers) on hand, and understanding where I may be able to purchase items at a heavily discounted price.

    Flipping requires a lot of preparation, careful study, and help!

  4. Larry Vestall

    Location! That says it all. We bought an abandoned old Victorian home spent 16 months renovating it back to gorgeous! Thinking it would sell itself. But 90 days later and it’s still sitting on the market why because we didn’t know the area at the time of purchase we just saw a 2500 sqft house for 5k. Can’t pass that up. But 150k later and 16 months of remodeling as my husband did most the work without a solid team. And we are still waiting for it to sell. Why? Because of the area!!! Not everything is always a good deal. No matter what the price is.

    • Ed B.

      Reminds me of the 1967 Mercedes Benz 200 diesel car I bought about 1988. It needed restoring, which I thought would be a good investment since Merceds Benz cars generally have a good reputation and probably hold their value, right? Wrong. Some models might, but not the 1967 200. I sunk $3500 into restoring it,then was unable to sell it. What a dog! It’s never enough to simply clean and paint something and think it’s going to be worth more, whether’s it’s houses or cars. Always make sure the asset ha demand and appeal from potential buyers before you spend a dime on it.

  5. Brenda Herman

    If not flipping what do you suggest for a new beginner-wholesaling? There just seems to be something backhanded about wholesaling; that is not telling the seller that you’re not actually buying their property but instead selling it to someone else

  6. Jerry Maze

    When I submit an offer I disclose that National REI Group, LLC , buyer reserves the right to assign it’s intetest in this contract to any person, corporation, or entity which it may designate. Also, I never sign under my name alone … signature is as follows

    buyer: Jerry Maze, Managing Member, National REI Group, LLC and/or assigns.

    That amounts to full disclosure.

  7. Ryan Wittig

    Great post Matt. Many sins were forgiven due to rising prices from 2011-2017/2018. The market has shifted (at least in the Boston area) and flipping/renovating definitely requires all three of the items you mentioned, but most importantly, you have to buy the right deal….

  8. Denise Graves

    Matt,
    Thanks for this post and video! Knowing the market, having a team and some extra money are all key… Having time is also important. From surprises that come up to things taking longer than expected – if you haven’t budgeted extra time, or don’t truly have the time to manage the project, it can result in lost money with carrying costs. It also adds an extra level of stress when there’s pressure to manage the project or do some of the work as well as the everyday life stuff we need to do.
    Will be sharing this 🙂
    Denise and Sean

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