In 28+ years, I have lost money on one flip. I actually consider it one of my deals ever.
I bought a dollar house in Killeen TX for $21000(It was actually the second time I bought this house as it was also my first ever purchase) inthe late 90s. I immediately has a buyer for $35000 with just a clean up. The day before closing, the buyer started demo without my permission and destroyed the kitchen and both baths. Their loan was turned down and they disappeared. I sent a notice of intent to sue and “someone “ started a small fire in the house. Fortunately, I bought the house at such a great price, I was able to sell it and only lose $1500
As far as not making as much as I expected? Well get used to that. Occasionally, I make more. However, A profit is a profit and move on to the next deal
You win some and you lose some . Hopefully you win more than you lose .
@Andrew Taylor only once. I stopped doing them after that.
When bought correctly ($0.70 on the dollar, less repairs) rehab/flip deals can absorb A LOT of things going wrong before loosing money. The caveat is that you must have bought correctly. Your calculated ARV must be accurate (get an appraisal). Repairs must be accurate (get inspection and/or multiple estimates [don't always go with the cheapest]).
Bad news: because it can absorb a lot of slop, it leads to sloppy business practices, which lead to sloppy business habits. Be disciplined, and discipline yourself. Always look for better, more efficient business practices.
I came close once, and learned to vet my contractors a lot better. a landscaper I hired only showed up with half the sod (I had given him the money for all the sod - mistake #1) and was dragging on and on with the work. AFTER giving up on the guy and hiring a new landscaper and buying sod again I came to easily find out online he had prior drug/weapon arrests.. he also gave the sod farm a bad check for the half sod I delivered.
Be very careful with a question like this. You are going to get very skewed responses because the audience is self selected. The people who are going to answer are the ones who are generally current investors. They are current investors because they have generally had success. The people who lost money are no longer current investors and are no longer here to answer.
Also most of the people here have only flipped in a bull market. (post 2010)
The majority lose on their first flip and never do it again. I lost 70K on my first one and didn't flip again for 3 years. Most people would not have done it again. I haven't lost on one since, but it is very common to lose money on flips. Lots of people turn their failed flip into a long term buy and hold rental and eventually come out ahead. In reality those were losing flips.
I don't know what your odds would be. Your profile says you are a contractor. I would think a contractor with some common sense would be able to make profits. And sometimes, you just consider your first loss to be your tuition.
@Eric Michaels very good points you make.
as a HML myself since the mid 80s.. profits do run on market conditions..
and many times we as the lender made as much if not more than the operator..
in 2017 my wife did two flips.. first one she made 120k on Ya second one she lost 30k LOL..
in our new construction we tend to be more consistent.. but even then I did 3 houses on the Oregon coast
made 16k on one and lost 20k on one and 30k on the other.. learned my lesson about building on the coast.
Great houses and we only paid 80k for the lots and sold the houses in the mid 400s but still lost money.
But to Eric's point post 2010 for us other than those have all been profits.. ( new construction) flips win some lose some.
My first home was a very slow live-in flip. I made money, but only because I did the work myself. I would have made more working a minimum wage job for the same time. I learned a ton though. I haven't flipped since, but I have done smaller rehab and made money on it. From talking w/my clients who do a lot of flips, sometimes they don't make much (like less than $10k for a year's work). It's a tough game.
I lost money on my first 3 flips. However, I dont consider those bad experiences. Some of the best education money could buy.
I used to flip houses, but I lost big on two consecutive investments and that has pushed me away from the concept. The first investment had an incorrectly built pool in the back yard, and the pool leaked out and created a sinkhole. The second building the previous owners failed to disclose (They said they had no clue) that the plumbing needed to be completely relaid as the material chosen for the pipes was of very poor quality and was prone to bursting. Very frustrating. Just get very thorough checks done on a unit by professionals prior to purchase, and it never hurts to get a second opinion.
I have not lost money on a flip but will admit that on some the profits did not warrant the time or effort. That is a loss.
Assuming no major hidden expenses the key to successful flipping is your time line. If your flips are running much beyond 3 months in and out your risk factor exponentially increases. Markets change quickly. Fast turn around and a well seasoned trusted crew is the key to success, but you will still have some losses.
In 20 flips I've never lost money, but I had to rent one and wait for a better market. It cash flowed so was okay, but it taught me to be a bit more careful about the ARV. This one lacked easy parking and was not in a good neighborhood, yet I underestimated how important that was. I only paid $28,500, so thought it would be easy to make money. Oops. I ended up with a profit of $6800 after a year of cash flow. I've had 3 others where I made less profit than estimated and 12 where I made more. For three of these, I made double my estimated profit thanks to an appreciating market. Keep in mind that this doesn't count my time, and I and my husband do a lot of the work ourselves.
What helps me calculate ARV is having my real estate license. Remember that as an investor you have to act fast and often don't get the deal, so you would be quite a demanding client for an agent.
I've never lost money on any real estate transaction. My conservative nature means that I've skipped some deals that would have made me money, but it also means I haven't cut it so close from the outset that I've lost, despite all manner of unexpected issues popping up on properties over the years. I'll take that. My mindset just doesn't cope well with losing money.
In approx 50 flips, ive lost on one, and it just happened this month. Truth be told, I never thought I would lose, and was shocked that I did. But I take full responsibility for the loss. As more investors came into the game, margins have gotten tighter. A month passed and I couldn't find a deal. So i pushed my numbers a bit to get one at auction, and in the end it backfired. I should have been more patient, and waited for the right deal, now Im stuck taking an $8000 loss. Initially feeling a bit defeated, but now feeling empowered, cause I learned from my experience and loss! There are alot of unknowns and what ifs in flipping, but when you know your numbers, do your due diligence, you will do great. Focus on where you want to be, not what your afraid of and give it your best shot!
Originally posted by @Andrew Taylor :
Yes, I'm a contractor - that's why I said I'm the OP that actually doing the work shouldn't be an issue. My day job now is withing repair estimates for Opendoor, so accurate rehab costs shouldn't be too hard to come by. I really think the ARV issue is the one I need the most help with.
Well, it is rather easy to know the ARV now. It is more difficult to predict the ARV for when you are ready to sell. In a bull market, MANY bad flips have been bailed out by rising prices during the flip period. It gives people a false sense of skill. Now as we end the bull run it isn't as easy.
Just look a little further down the list of the recent Fix and Flip posts here on BP and I see 3 posts referring to having a difficult time selling their flip. The more difficult times are starting and most here have never been through a bear cycle. For me, I prefer to flip in bear cycles. I hate competing with every tom dick and harry at stupid prices. In a bear market, they all go away. The difficult times are the transitions from bull to bear or stagnant as now.
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