5000 dollar profit on flip and I'm upset!

Real Estate Deal Analysis & Advice
8yFollow

5000 dollar profit on flip and I'm upset!

Aaron Hollingshead
Flipper/Rehabber · Roswell, NM · Member since 2014 · 74 posts · 65 votes

So, I just closed on the sale of my 4th flip house in the last 2 years and I made 5000 dollars.  I was thinking it would be a quick 10-20k profit and after it was all said and done, I find myself reflecting on a few mistakes made along the way!  

First...I was so eager to get my cash working for me, I settled for a good...but not great deal.  I thought was that it would be quick and straight forward with a small margin so why not go for it.  

I now realize that I made two mistakes with this investment.  First, I undervalued the opportunity cost.  I sat by and watched a couple of better deals pass by without any cash in hand because of the money I had wrapped up in this deal.  Second, I think that I lost sight of my goals.  Only making 5,000 dollars feels like a defeat but it made me realize that I need to develop a laser focus on what I hope to accomplish.  Basically, this made me realize that I need to define my goals a bit more clearly...anybody else felt like a failure after making 5k?  I regularly hear that you WILL lose money on a deal in this business if you stick with it long enough...I hope to avoid that!  

3Reply
52 views

Most Popular Reply

Nick C.
Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes
8y

You already stated you made 2 realizations, so I wouldn't call this flip a failure. Unfortunately many people in this business have had to lose tens of thousands of dollars to come to the same conclusions. Making $5k is a small price to pay... 

2Reply
See this reply in the discussion

16 Replies

Jump to latestLatest
  • Account Closed
    Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
    8y

    Congratulations on your 4 flips. I started out doing Fix & Flips and then moved to buying Subject To and putting in Tenant Buyers who do all of the fixing. They give me 10% down cash (cashier's check) so usually $15k to $25k up front. Why do I do things this way? Because of exactly what you have just experienced, I like guaranteeing my profit. Fix & Flips are the hardest and heaviest taxed real estate transactions. I got tired of working for the government after making too little for too much effort.

    2Reply
  • Nick C.
    Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes
    8y

    You already stated you made 2 realizations, so I wouldn't call this flip a failure. Unfortunately many people in this business have had to lose tens of thousands of dollars to come to the same conclusions. Making $5k is a small price to pay... 

    2Reply
  • Vinay H.
    Cambridge, MA · Member since 2017 · 268 posts · 247 votes
    8y

    Depends, if you made 5k on a 50k  and 1 month project, it ain't bad. But if it is 150k and 3 months, then you got pocket change.

    Next time, make the numbers work by buying at the best possible price

    1Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    8y
    Don’t be hard on yourself . Making 5 grand sure beats losing 5 grand . And you got a free lesson along with it . Learn from it and move on . A lot of people lose on flips because they bought too high and they underestimated the rehab costs
    1Reply
  • Alex BekezaBusiness Member
    Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    8y

    @Aaron Hollingshead  Sounds like you got paid $5k to go to school!  Keep grinding, hindsight is 20/20.

    At what point do you feel like you weren't lazer focused? Renovations that didn't have a good ROI or financing terms which hurt your profit? What was the specific hiccup.

    [email protected]818-606-8823
    Investor Property Loan5306 Reviews
    WebsiteView Page
    0Reply
  • Joseph M.
    Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
    8y
    Aaron Hollingshead Is flipping your full time income or do you do it on the side ? Did you do all the work yourself ? How much did you put into the deal? If for example it took 4 months and flipping is your full time gig that isn’t great because it means a profit of about $15,000 a year If it took two months and you have other income sources and didn’t end up spending much money on it and only put up a small amount of money then I’d say not too bad . I’m sure it was a good learning experience for you though and at least you didn’t lose money
    0Reply
  • Nik S.
    OH · Member since 2014 · 454 posts · 227 votes
    8y
    I’ve been flipping for a few years now and my lowest profit was about $5000 as well. It was an easy flip, not much planning etc. In Ohio, if a home is purchased and being sold within 6 months and the buyer is FHA, banks require (2) appraisals. 1st appraisal was slightly over our agreed purchase price and second appraisal was almost $15,000 under. I obviously wasn’t going to move forward with the deal as the bank chooses the LOWEST FHA appraisal. That FHA appraisal stuck with my house for an additional 6 months......so I had to try and find conventional buyers (which was hard for this price point / area). I decided I couldn’t sit on it any longer and just move on. Finally got a conventional offer, cleared $5000 as opposed to $15,000 on my “easiest work” flip. Left me with a bad taste in my mouth but it’s part of the game. Continue to learn the system and keep moving on! Rather make $5000 then lose $5000 any day :-)
    1Reply
  • Dahrian Barrett
    Knoxville, TN · Member since 2018 · 24 posts · 12 votes
    8y

    You either Win or Learn! Never Fail.

    0Reply
  • Victor S.
    WorldWide · Member since 2016 · 1k+ posts · 1k+ votes
    8y

    I can't imagine what kind of thread to expect from OP when he loses $5k... On a serious note, be glad you actually made money on it and learned some invaluable lessons along the way. 

    The biggest mistake that you've pointed out yourself:

    "I was so eager to get my cash working for me, I settled for a good...but not great deal."

    1Reply
  • Peter Sanchez
    Real Estate Investor · Washington, DC · Member since 2014 · 236 posts · 328 votes
    8y

    It's easier to buy stocks than buy a house, but Charlie Munger (Warren Buffett's business partner) has sometimes gone for years without buying anything and just sitting on the cash.  He said "It takes character to sit with all that cash and to do nothing.I didn't get to where I am by going after mediocre opportunities."

    2Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    8y

    @Aaron Hollingshead I never feel like a failure if I am making money. I am not even sure I would call it a failure if I lose money either. That is probably more my outlook on how I view things. I just resolve to not make the same mistake again and consider it a learning process. 

    The reality is that if you target $10-20K profit, it is fully expected that the occasional deal will come in at $5K due to unforeseen issues. Do enough deals and there will always be problems. Maybe you need to set your profit goal higher to insure your misses come in higher.

    Take pride in finishing your 4th profitable flip. You will keep getting better. 

    1Reply
  • Luke Lanier
    Investor · Little Rock, AR · Member since 2016 · 14 posts · 17 votes
    8y

    Congrats on the 4th flip!  Obviously you are doing something right or you wouldn't have made it past flip #1.

    I had a similar experience.  I bought a flip with $30k potential profit and was too eager...I hired a contractor on a friend's referral but without doing my due diligence.  Turns out he was a dishonest guy, he wasn't licensed with the state, and he had a not-too-friendly history with the city's chief building inspector.  The inspector finds the guy on my flip and came in with guns loaded...I watched him drain the profit from my flip.  All because I was too lax with checking up on some very important details on the front end.  My mistake, my loss.  I resigned myself to losing my money on that one, and when I managed to eke out a $2,600 profit at the end I considered my self lucky.  I got paid $2,600 to learn some very important lessons.  

    Someone once told me "experience is expensive", and now I know what they meant.  I'd look at it like this: you got paid $5,000 to learn how to make even better investment decisions in the future.

    2Reply
  • Maurice D.
    Coppell, TX · Member since 2015 · 485 posts · 310 votes
    8y

    you made money.  don't be hard on yourself, instead do a thorough post mortem with the numbers (you did), see what went wrong and avoid that going forward.  now focus on finding the next deal.

    There's more than $$$ to improve:

    1) how can I reduce my costs

    2) how can I do it in less time (holding costs,early start planning etc)

    3) how can I make it sell quicker (staging etc)

    so there, more things to think about besides felling bad for 5k.

    1Reply
  • Aaron Hollingshead
    OP
    Flipper/Rehabber · Roswell, NM · Member since 2014 · 74 posts · 65 votes
    8y

    Thanks to everybody for the feedback!  @Vinay H. you're right!  It was a cash deal...I was in for 96k of my own money.  With my other projects I have put in closer to 60-80k out of pocket and netted 15-30k, which is why I'm disappointed with this spread.  That said, I didn't do any of the work myself.  I work another job, in fact I actually did the whole project from Spain without ever having seen the property (that's another story!).  So all in all, I can't complain...the issue I have is mostly that I feel like I should have known better...and I intend to be smarter moving forward!  

    To be more specific, here were some of the issues that I was hard on myself for.  

    1. I was wishy washy about whether I'd flip it or turn it to a rental.  

    2. I decided late in the renovation to replace the roof.

    3. I tried doing some plumbing work without a licensed plumber and got dinged by the city...

    @Nik S. my area is the same...This house sold before it hit market, and my last one sold within 24 hours...that's in a market where the average time on market is more than 90 days!  So, I always feel confident that the work will sell the house quick, but sometimes worry about the appraisal.  This time, our appraisal just squeaked out above the offer price.  

    I'm already onto my next project and I think that some of the lessons from this place will help me moving forward! 

    2Reply
  • Joseph M.
    Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
    8y

    60-80k out of pocket and netting doesn't sound too bad if they aren't taking too long. How long are the deals taking from when you buy the property to the sale date? 

    What city are your flips located in?

    0Reply
  • Arun D.
    Flipper/Rehabber · Scottsdale, AZ · Member since 2013 · 11 posts · 7 votes
    8y

    If you ever lost  big money on a deal or stock you know breaking even or making a little is not the worst place in the world. Its always better to get your principal back to go do another deal.

    I like to take a macro view and tally up all the deals/investments at the end of the year and see what the net profit/return is.

    That way you can average all your deals and you may also end up with an out-sized PROFIT house that averages out the small 5K profit you made on this one.

    Like Lebron James says, just try to get better at your craft every day..!

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free