{"id":77876,"date":"2016-04-24T05:00:00","date_gmt":"2016-04-24T11:00:00","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=77876"},"modified":"2023-03-20T23:02:30","modified_gmt":"2023-03-21T05:02:30","slug":"2016-04-24-flipping-house-lessons","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2016-04-24-flipping-house-lessons","title":{"rendered":"7 Things I Desperately Wish I Had Known When I Started Flipping Houses"},"content":{"rendered":"

(This post was done in both text and video format (at the bottom.) Take your pick!)
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\nWhen I first decided to flip houses<\/a>, I was a bit arrogant.<\/p>\n

I thought, \u201cHow hard could this really be? I mean, it\u2019s just like the TV shows, right?\u201d<\/p>\n

Wrong.<\/p>\n

I\u2019ve spent the last decade buying both rental properties and doing house flipping, and I\u2019ve learned a LOT. Sometimes I wish I could go back and give myself some advice. But I can\u2019t. However, I can do the next best thing: I can share that advice with you.<\/p>\n

Therefore, in this post I give you seven things I desperately wish I had known when I started flipping houses.<\/p>\n

\"Single<\/a><\/p>\n

**Hey you: <\/strong>Are you interested in house flipping? If so, don\u2019t miss this week\u2019s BiggerPockets Webinar titled, “How to Analyze a Fix and Flip Deal (And Avoid Getting Burned!)<\/a><\/strong>\u201d Why? Because (as you\u2019ll see in this post) knowing how to do the math is one of the most important steps in ensuring you\u2019ll make a big profit. Sign up now<\/a> to hold your spot! OK, back to the post!<\/p>\n

1. The Flip Doesn\u2019t Begin When You Buy It<\/h2>\n

The first thing I wish I had known when I started flipping houses is that work doesn\u2019t begin when you buy the property. It actually starts before that.<\/p>\n

No, I\u2019m not talking about breaking into the house and removing walls.<\/p>\n

I\u2019m talking about the prep work.<\/p>\n

You see, what most people do (and I did for many years) is wait until the day after closing and then start planning for the flip.<\/p>\n

Sure, that works, but you are missing out on some valuable time that could help your entire flip move faster!<\/p>\n

During this \u201cdue diligence process,\u201d you can use the time to line up contractors, create an incredibly detailed scope of work, open up a checking account for the property, pick out materials (though I would wait to actually buy them until closing), and more.<\/p>\n

\"house-flipping-report-1\"<\/p>\n

2. The Scope of Work is Unbelievably Important<\/h2>\n

Perhaps the most important document you\u2019ll use during the entire flip process is known as the \u201cscope of work.\u201d<\/p>\n

Essentially, this is a detailed list of every single item that needs to be rehabbed in the home.<\/p>\n

When I started flipping houses, I would jot down some notes as to what needed to be done — but it was far from complete.<\/p>\n

Related:<\/strong> The 7 Commandments of Choosing a Profitable House to Flip<\/a><\/em><\/p>\n

I figured, \u201cEh, what\u2019s the purpose of getting too detailed? Whatever problems we find are going to come up anyway, and I\u2019ll just have to fix them. So who cares if they are written down? It\u2019s not a big deal, right?\u201d<\/p>\n

Wrong! It\u2019s a huge deal!<\/p>\n

Because the more detailed your scope of work is, the more smooth and on-budget your entire flip will be. When you know everything about the property, you can get more accurate estimates from contractors, schedule people at the right times, reduce the number of \u201cchange orders\u201d the contractors will try to charge you for, and reduce your stress considerably.<\/p>\n

The scope of work is like a road map — it\u2019s easier to follow when it\u2019s detailed.<\/p>\n

3. Cheap Doesn\u2019t Mean Good Deal<\/h2>\n

Many of the houses I have flipped I should not have.<\/p>\n

Because I bought them because they were cheap, not because they were a good deal.<\/p>\n

There is a difference — and understanding that difference is the thing that separates the winners from the losers in house flipping.<\/p>\n

Some cheap houses are cheap for a reason. Perhaps it\u2019s in a bad neighborhood. Perhaps it needs too much work. Perhaps there are environmental reasons for its price, such as lead-based paint or asbestos.<\/p>\n

Whatever the reason, remember: Cheap doesn\u2019t necessarily mean it\u2019s a good deal.<\/p>\n

4. You Make Your Money When You Buy<\/h2>\n

Once you\u2019ve purchased a house, your profit is already capped at a certain point, and it’s not going any higher. Therefore, if you pay too much for a property going in, it\u2019s unlikely you\u2019ll ever get out with the profit you wanted.<\/p>\n

You can\u2019t magically make the house worth more than it\u2019s going to be worth. The after repair value isn\u2019t going to change no matter how cute the paint is.<\/p>\n

Therefore, always do your math CAREFULLY when buying a flip. Never buy on emotion, but buy because the math shows you are going to make a profit.<\/p>\n

\"flipping-tips\"<\/p>\n

5. Dealing With Contractors is the Hardest Part<\/h2>\n

I firmly believe the most difficult part of flipping is dealing with the contractors.<\/p>\n

You might find a great deal, might have incredible financing<\/a>, and it might be in a great neighborhood.<\/p>\n

But if you have horrible contractors or simply don\u2019t manage your contractors correctly, you\u2019ll struggle and maybe even lose money.<\/p>\n

Therefore, don\u2019t think of \u201cfinding a contractor\u201d as a quick and easy task. Put an incredible amount of time, effort, and due diligence into hiring the best contractors.<\/p>\n

The more work you do up front finding and vetting contractors, the better your flip will go.<\/p>\n

For more on my best tips for finding contractors, be sure to check out my post, \u201cThe Ultimate Guide to Finding an Incredible Contractor<\/a>.\u201d<\/p>\n

6. It\u2019s More Expensive Than You Think to Rehab a Property<\/h2>\n

One of the most painful lessons I\u2019ve had to learn over and over and over in my business is this: It\u2019s far more expensive to rehab a house than you might initially think.<\/p>\n

Related:<\/strong> 5 Smart Ways to Reduce Your Fix and Flip Expenses<\/a><\/em><\/p>\n

This is especially true for people who are \u201chandy.\u201d<\/p>\n

I mean, I know that it would take me about four hours to paint a big room, including trim. So when I think about hiring a contractor, I think \u201cOK, so if they are around $30 an hour, then I should probably budget around $120 for paint.\u201d<\/p>\n

Then I\u2019m shocked when all the bids are north of $400! Why? There are a lot of reasons, including:<\/p>\n