Broke even on my first two flips - need advice from experienced flippers

Austin, Texas
Rehabbing & House Flipping
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Broke even on my first two flips - need advice from experienced flippers

Logan Howell
Member since 2024 · 4 posts · 6 votes

Hello flippers,

I'm relatively new to this and have broken even on my first two flips. Could anyone experienced with this help review the numbers from my latest flip to see where all I'm going wrong? I should mention I paid a GC for the rehab work, who charges $18k for managing the project; I have a full time job, so unfortunately I don't have time to manage it myself.

Purchase price: 415,000
Repairs: 117,659
ARV: 605,000
Hard money loan: 423,500 (11.99% interest)
Holding time: 4 months
Interest: ~$14k
Agent commission: 4% (3% buyers, 1% sellers)
Staging: $2400
Design: $3000
Builder's Risk: $3000
Property Tax: $4000
Utilities: $900
Other purchase fees (loan origination, title, survey, appraisal, inspection, lender fees, etc): $16,507

Thanks!

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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1y
Quote from @Logan Howell:

Hello flippers,

I'm relatively new to this and have broken even on my first two flips. Could anyone experienced with this help review the numbers from my latest flip to see where all I'm going wrong? I should mention I paid a GC for the rehab work, who charges $18k for managing the project; I have a full time job, so unfortunately I don't have time to manage it myself.

Purchase price: 415,000
Repairs: 117,659
ARV: 605,000
Hard money loan: 423,500 (11.99% interest)
Holding time: 4 months
Interest: ~$14k
Agent commission: 4% (3% buyers, 1% sellers)
Staging: $2400
Design: $3000
Builder's Risk: $3000
Property Tax: $4000
Utilities: $900
Other purchase fees (loan origination, title, survey, appraisal, inspection, lender fees, etc): $16,507

Thanks!


 Simple = paid way too much for the property. 

If you add up all those numbers above and include the $18k for the PM you are over the ARV.

You have $200k in costs including closing and commissions. 

For a house like this i would be around $350k tops. 

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    1y
    Quote from @Logan Howell:

    Hello flippers,

    I'm relatively new to this and have broken even on my first two flips. Could anyone experienced with this help review the numbers from my latest flip to see where all I'm going wrong? I should mention I paid a GC for the rehab work, who charges $18k for managing the project; I have a full time job, so unfortunately I don't have time to manage it myself.

    Purchase price: 415,000
    Repairs: 117,659
    ARV: 605,000
    Hard money loan: 423,500 (11.99% interest)
    Holding time: 4 months
    Interest: ~$14k
    Agent commission: 4% (3% buyers, 1% sellers)
    Staging: $2400
    Design: $3000
    Builder's Risk: $3000
    Property Tax: $4000
    Utilities: $900
    Other purchase fees (loan origination, title, survey, appraisal, inspection, lender fees, etc): $16,507

    Thanks!


     Simple = paid way too much for the property. 

    If you add up all those numbers above and include the $18k for the PM you are over the ARV.

    You have $200k in costs including closing and commissions. 

    For a house like this i would be around $350k tops. 

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  • Ko KashiwagiPro Member
    Lender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes
    1y

    Hi Logan,

    Was the budget in line with the original scope of work and was the ARV in line with your original expectation?

    In looks like you're doing deals in Austin which I heard has taken a huge downturn but if your budget & ARV was close to what you expected the biggest factor you can change is the purchase price. Not sure how flippers calculate margins in that area but generally most investors look to purchase at ARV times 0.75-0.8 minus the costs (rehab budget, commissions fees) to make enough profit. So in this case something like:

    $605,000 x 0.75 - (costs) = Purchase price

    $605,000 x 0.80 - (costs) = Purchase price

    310-848-9776
    3Reply
  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    1y

    First, to get out of your first 2 flips without losing money is great job! Most investors lose money on their first flip, at a minimum.

    Second, there are 3 main numbers to review - purchase price, expenses, sales price. You would have to tell us where you went wrong. Based on your due diligence you failed on one of these three numbers. Most new investors fail when buying. They do not buy low enough and this is likely your problem. They also do not stick to their budget or do not anticipate unforeseen expenses. Lastly, they overestimate the sales price.

    Tip, I have used hard money one time and one time only! I realized that the hard money lender made more than anyone on the transaction. If you were able to go in cash you would have saved about $25,000 in expenses.

    [email protected]239-339-3969
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    6Reply
    • Logan Howell
      OP
      Member since 2024 · 4 posts · 6 votes
      1y

      Thanks everyone. Really appreciate the thoughts and advice. I, too, think I spent too much on purchase and should've crunched the numbers more carefully beforehand.

      1Reply
    • Logan Howell
      OP
      Member since 2024 · 4 posts · 6 votes
      1y
      Quote from @Adam Bartomeo:

      First, to get out of your first 2 flips without losing money is great job! Most investors lose money on their first flip, at a minimum.

      Second, there are 3 main numbers to review - purchase price, expenses, sales price. You would have to tell us where you went wrong. Based on your due diligence you failed on one of these three numbers. Most new investors fail when buying. They do not buy low enough and this is likely your problem. They also do not stick to their budget or do not anticipate unforeseen expenses. Lastly, they overestimate the sales price.

      Tip, I have used hard money one time and one time only! I realized that the hard money lender made more than anyone on the transaction. If you were able to go in cash you would have saved about $25,000 in expenses.

      Good to know about hard money - I've come to get this impression as well. If you dont mind me asking, was this cash you switched to lent or your personal capital? If the latter, I'll need to save up more before that's an option for me.
      1Reply
    • Adam BartomeoBusiness Member
      Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
      1y

      Quote from @Logan Howell:
      Quote from @Adam Bartomeo:

      First, to get out of your first 2 flips without losing money is great job! Most investors lose money on their first flip, at a minimum.

      Second, there are 3 main numbers to review - purchase price, expenses, sales price. You would have to tell us where you went wrong. Based on your due diligence you failed on one of these three numbers. Most new investors fail when buying. They do not buy low enough and this is likely your problem. They also do not stick to their budget or do not anticipate unforeseen expenses. Lastly, they overestimate the sales price.

      Tip, I have used hard money one time and one time only! I realized that the hard money lender made more than anyone on the transaction. If you were able to go in cash you would have saved about $25,000 in expenses.

      Good to know about hard money - I've come to get this impression as well. If you dont mind me asking, was this cash you switched to lent or your personal capital? If the latter, I'll need to save up more before that's an option for me.

      I do both but prefer to have a cash partner because my CoC return is infinite.

      [email protected]239-339-3969
      Bartomeo Property Management4.7150 Reviews
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      1Reply
    • Logan Howell
      OP
      Member since 2024 · 4 posts · 6 votes
      1y
      Quote from @Adam Bartomeo:

      Quote from @Logan Howell:
      Quote from @Adam Bartomeo:

      First, to get out of your first 2 flips without losing money is great job! Most investors lose money on their first flip, at a minimum.

      Second, there are 3 main numbers to review - purchase price, expenses, sales price. You would have to tell us where you went wrong. Based on your due diligence you failed on one of these three numbers. Most new investors fail when buying. They do not buy low enough and this is likely your problem. They also do not stick to their budget or do not anticipate unforeseen expenses. Lastly, they overestimate the sales price.

      Tip, I have used hard money one time and one time only! I realized that the hard money lender made more than anyone on the transaction. If you were able to go in cash you would have saved about $25,000 in expenses.

      Good to know about hard money - I've come to get this impression as well. If you dont mind me asking, was this cash you switched to lent or your personal capital? If the latter, I'll need to save up more before that's an option for me.

      I do both but prefer to have a cash partner because my CoC return is infinite.


      Good to know, thanks. Any advice for finding a cash partner for flips? I imagine it's a matter of building connections and flip experience? 

      2Reply
  • Ricardo S.
    Flipper/Rehabber · Atlanta, GA · Member since 2014 · 166 posts · 88 votes
    1y

    At this point in the Market, at least here in ATL. Some neighborhoods you can get away with being all in at 75% of ARV but for most areas here now it's recommended to be all in at 60 to 70% of ARV.

    1Reply
  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    1y

    @Logan Howell Mostly, yes. Most partners want to know that you have a very successful history before they hand money over. But, there are folks that are willing to take more risk because of your relationship - family, friends, acquaintances. 

    [email protected]239-339-3969
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  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    1y

    @Logan Howell I strongly disagree with @Adam Bartomeo.... I think you got LUCKY. Very very lucky. 

    You're using very high leverage and very high expense ratio so if/when you flip into the red losses accelerate VERY fast. I am betting it's you don't have $ to cover those losses meaning everything implodes. 

    You came within a hairs width from it all...... You disarmed the nuke with 1 second left. 

    Private $ is NOT the answer. Getting a hell of a lot better on your margins IS your 1st step. 

    2nd step is CONSISTENCY. 

    AFTER you get your numbers into correct range, and you consistently do this, THEN you are in a place to change out expenses via replacing HM with Private $. 

    Any Private $ you gotta expect them not being dumb. They will want to see track record of what you've done, and they will see exactly what I am seeing. That will project naivety, that your so green that you still don't know what you don't know. It could burn a bridge and at best it will place a negative brand you'll have to overcome in future. 

    Your not appropriately considering risk into your analysis. Either you under valued rehab or over valued ARV, or just don't comprehend the margin requirements. Either way you gotta first fix your math and viability.

    Because you keep going like this.... it's only a matter of time before that nuke goes off in your face. 

    3Reply
  • Juan Cristales
    Investor · Willis, TX · Member since 2014 · 245 posts · 124 votes
    1y

    Disarming the nuke with a second left is a great analogy... it has the sense of high stress, catastrophic loss and the implication that more than just one person is going to get hurt... 

    I'm happy that you didn't lose money @Logan Howell and are willing to be transparent about it. That's a fantastic mindset to have and will serve you well going forward. Good on you for that! 

    Regroup. Go at it again. You've learned some very valuable lessons. Can't wait to see your success!

    2Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    1y

    @James Hamling is right. Congrats on 'only breaking even'!!!! I have lost money on flips, even being a seasoned GC, and even with a deep pockets money guy as partner.

    I suspect that your renovation went over budget, along with your time-line. That is what got me and most others. You have to buy cheaper AND be spot-on with your budget. There is also Mr Murphy to consider, there will ALWAYS be some unexpected occurences.....

    2Reply
    • James Hamling
      Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
      1y
      Quote from @Bruce Woodruff:

      @James Hamling is right. Congrats on 'only breaking even'!!!! I have lost money on flips, even being a seasoned GC, and even with a deep pockets money guy as partner.

      I suspect that your renovation went over budget, along with your time-line. That is what got me and most others. You have to buy cheaper AND be spot-on with your budget. There is also Mr Murphy to consider, there will ALWAYS be some unexpected occurences.....


      When I was flipping FT I got asked what it was like, and best term I could find is it's the most exciting misery of stress, anxiety and frustration one will ever celebrate, lol. 

      I'd be so excited up to 10 seconds after get the next deal under contract, which instantly converts into mass panic of "what did I miss, get wrong, forget". 

      Then the excitement and fun of demo day, which is like getting married and divorced all in same day.... all fun and games when starts and by end of day your calling people yelling "wtf, this isn't what I signed on for, it's gonna cost how much?!".... 

      Halfway through and finally see light at end of the tunnel, as you pace along in Plan E of things and you now found religion as your daily praying "oh dear lord please just let the market hold".... 

      Finally done and wrapped, gritting teeth through listing, offers, getting through contingencies and it held to closing..... Like any good addict selective amnesia takes over and you forget the nightmares of past weeks/months and clap with joy...... And go start the whole bi-polar insanity over again..... Because now your freaking out because ya need the next deal under contract yesterday.... 

      Yeah, your a flipper..... And probably funding a therapists kids through University. 

      1Reply
  • Thomas Adams
    Member since 2025 · 10 posts · 1 vote
    1y

    I lost 30k on my first (and last) flip. Flipping is one of those things that sounds great off the bat but is seriously hard to pull off..

    0Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    1y

    Was this in Austin?

    You overpaid and sold in a falling knife market. 

    Listen if the offers are lowering, your bid has to lower even more. Meaning the spread widens. Otherwise, you really aren't valuing the risk you're putting in.

    You are very fortunate you didn't get blown out. 

    4Reply
  • Jules Aton
    MD/DC · Member since 2024 · 1k+ posts · 1k+ votes
    1y

    I always think of the old saying that I first heard from my father "you make your money when you buy not when you sell".  

    2Reply
  • Peter MckernanBusiness Member
    Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
    1y

    - Does it need to be staged in that area? 

    - 3K for design, this should not be something you are paying for... Take a look at the flip down the street and R and D it... Rip off and duplicate (rip off, means, use the same style, same materials and all).

    - That HML is pricy at 11.99%... I would be shopping around each and every day when you are getting deals done.. This is an example of it... You need to shop around and get the best rate and best point breakdown
    -you would have made money on this stuff... TBH, the management fee is too much too... You could manage some stuff on your own too

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  • Greg M.
    Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
    1y

    Why'd you pay the buyers agent 3%? Is that common in Austin? I thought most places were 2.5% for each side.

    1Reply
  • Warren Powers
    Member since 2019 · 60 posts · 31 votes
    1y

    My current flip is not going to break even so I went back over the numbers on this one versus previous successful flips. I found simply what has been said here: I paid too much for the purchase. My target for a purchase should be 70% of ARV-rehab. If we apply this your deal we get (.7*605000)-117,659=305,841 as our ideal offer price. Reverse the math to get (415000+117659)/605000=0.88. This coincidentally is exactly where I am at in my deal. I paid 88% for my flip and will loose money. My successful deals were at 76% and 74%. Of course this relies on accurate ARV and rehab forecasts. Those forecasts were within tolerance for my flip, I just flat paid to much for the property. Each of us can determine our own risk/reward profile but for me I think I want to keep my next flip at 75% or better.

    0Reply
  • Gene K.
    Investor · Bergen, NJ · Member since 2011 · 21 posts · 6 votes
    1y

    Hey Logan. There are some cool flip calculators online you can use to see if a project is worth doing. 

    1Reply
    • Bruce WoodruffPro Member
      Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
      1y
      Quote from @Gene K.:

      Hey Logan. There are some cool flip calculators online you can use to see if a project is worth doing. 


      True.....but I would be wary of them because they do not take into account two of the most important factors: 1) Reno budget - this is critical to get right and the cause of most failures. 2) Time - it is near impossible to calculate this accurately, too many moving parts...

      Still, thay can give the prospective investor a ballpark idea.....

      0Reply
    • James Hamling
      Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
      1y
      Quote from @Bruce Woodruff:
      Quote from @Gene K.:

      Hey Logan. There are some cool flip calculators online you can use to see if a project is worth doing. 


      True.....but I would be wary of them because they do not take into account two of the most important factors: 1) Reno budget - this is critical to get right and the cause of most failures. 2) Time - it is near impossible to calculate this accurately, too many moving parts...

      Still, thay can give the prospective investor a ballpark idea.....


      I have never, in all my years, seen even 1 of these "flipper calculators" that I'd say even touches on "ok". 

      None of them correctly estimate. 

      Go to Clear Estimates, this is the simplest easiest entry for anyone into CORRECT estimating. 

      You need accurate scopes of work, accurate market estimates (RS Means) and a gantt chart. 

      These are the 3 MUSTS. 

      1Reply
  • Ekaterina Lansky
    Real Estate Consultant · CA · Member since 2024 · 32 posts · 5 votes
    1y

    Congrats on breaking even on your first two flips! Let's review: your purchase price ($415,000), repairs ($117,659), ARV ($605,000), hard money loan ($423,500 at 11.99%, ~$14k interest over 4 months), GC fee ($18k), commissions (4% = $24,200), and other costs (staging, design, fees, etc., totaling ~$29,807) leave you with a tight gross profit of ~$18,534. The high interest and GC fee are eating into your margins. You might save by comparing lenders on a platform to get better rates or faster funding, cutting hold time. Also, consider trimming staging/design costs ($5,400). What's your GC's breakdown, and have you explored other lender options?

    0Reply
  • Ekaterina Lansky
    Real Estate Consultant · CA · Member since 2024 · 32 posts · 5 votes
    1y

    Congrats on breaking even on your first two flips! Let's review: your purchase price ($415,000), repairs ($117,659), ARV ($605,000), hard money loan ($423,500 at 11.99%, ~$14k interest over 4 months), GC fee ($18k), commissions (4% = $24,200), and other costs (staging, design, fees, etc., totaling ~$29,807) leave you with a tight gross profit of ~$18,534. The high interest and GC fee are eating into your margins. You might save by comparing lenders on a platform to get better rates or faster funding, cutting hold time. Also, consider trimming staging/design costs ($5,400). What's your GC's breakdown, and have you explored other lender options?

    0Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    1y

    Nice work.  While others talk about real estate, you're out taking action.

    Maybe consider moving into your next flip, handle some stuff yourself, and sell tax free after two years. 

    0Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    1y

    Nice work.  While others talk about real estate, you're out taking action.

    Maybe consider moving into your next flip, handle some stuff yourself, and sell tax free after two years. 

    1Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    1y

    That's a win in my book. You got a free education! 

    You should have made 10% and a good chunk of that went into your GC and HML. The rest is probably in rehab cost and purchase price. Profit is made on the margins, 2% or 3% in each category. Play with that on a spreadsheet, run best case/worst case on expenses. You see how razor thin your margin of error is. If you have 25 line items and you can squeeze 2k on each, that's 50k profit.

    Also, flipping is a job and not investing. The day has 24h, so if you sleep 8 and work 8, you still have 8 more to work on your flip. And 16 on weekends.

    To get good at flipping you need to do one a month or so. That is definitely a full time job! And heavily taxed.

    That's why buy & hold is where it's at.

    0Reply
  • Joe S.Pro Member
    Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
    1y

    How did you find this property?

    0Reply
  • Jeb Durgin
    Lender · South Lake Tahoe, CA · Member since 2019 · 109 posts · 36 votes
    1y

    Hey there! Honestly, you're doing better than you think — breaking even on your first two flips is like making it through your first two DIY projects without hot gluing your fingers together. 

    That said, your GC fee + interest + all those sneaky soft costs are definitely nibbling away at your profit like a toddler with a snack they’re “just going to try.”

    Quick tip: On tighter ARV margins like this, you either need to trim down reno costs (maybe a mix of GC + subbing some tasks out), or only go after deals with at least a 15–20% cushion after everything's said and done. You're super close — just a few tweaks away from flipping like a pro.

    Feel free to send the numbers — happy to give it a second look!

    0Reply
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