5 Vital Tips for Flipping Success (Based on My Mistakes!)

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Flipping can be a lot of fun, right?

You get to turn something ugly into something beautiful.

You get to hone your design skills and impress your friends.

And, let’s be honest…

You can make a lot of money. 

But house flipping is not as easy as the TV shows make it seem!

You know that, right?

Good! You are already farther along the path than most flipping newbies.

House flipping can be fun, challenging, and profitable — but it can also be dangerous. Many people have gone bankrupt because they decided to get into house flipping.

I’ve lost money on flips that didn’t turn out the way I wanted.

It sucks.

However, like any business venture, practice makes perfect.

Ok, that’s a lie. You’ll never be perfect at house flipping. But at least “practice makes better.”

Today I want to talk about five vital tips for house flipping success that I wish I had known when I first started on my house flipping journey. Knowing these would have saved me hundreds of hours of wasted time and thousands in lost dollars.

Let’s make sure you avoid that and find incredible success on your house flipping journey.

But first…

*** Hey, you! Yes, you! If you are reading this post, you must like the idea of house flipping. If so, I want to invite you to this week’s BiggerPockets Webinar, How to Analyze a Fix and Flip Deal (And Avoid Getting Burned!). We’ll be talking about the best ways to do the math, which is tip #1 on this list! Hope you can make it! And now back to the post!)***

Okay, let’s get to the five vital tips for house flipping success

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1. Understand the Math

Before the paint colors, before the new countertops, before the demolition…

There is the math.

The math is like a crystal ball, helping you see the future.

It shows you the right improvements to make.

It guides you to the best neighborhoods.

It helps you know if you will succeed or fail.

However, so many people struggle with the math. They see a dilapidated house and start thinking about all the beautiful things they could do to the house, but they don’t see the math behind it. Does it really make sense, financially? Is this house really going to provide a great profit? Should you really do this flip?

The math helps you answer those questions. The math helps you gain confidence. The math helps you avoid mistakes.

The math is not as simple as the TV shows make it seem, but it’s also not rocket science either. It’s simply a matter of knowing ALL of your expenses and subtracting them from your ultimate profit.

There are many blog posts here on BiggerPockets about analyzing a flip so I’m not going to dive deep into the topic here.

Also, if you are not using the BiggerPockets House Flipping Calculator… you are missing out. Seriously, it’ll save you a dozen hours a month analyzing deals!

house-flipping

2. Know Your After Repair Value

When you decide to get into house flipping, there is one single number that is more important to get right than any other.

Your ARV or “After Repair Value.”

In other words, what is the property worth after it’s fixed up?

Tip #1 in this post was to become a math nerd when flipping houses, but tip #1 begins with this number. If you don’t know your ARV, you’ll struggle to ever make a profit.

Related: What is ARV or “After Repair Value”?

I once flipped a house that I thought would sell for $170,000.

It didn’t.

It sold for $120,000.

I didn’t know my ARV correctly. 

Ouch.

So how do you determine your property’s ARV?

The ARV is determined by looking at what other similar properties have sold for recently and making adjustments accordingly.

For example, if a similar house sold for $250,000 and it is just a little bigger than yours, then you might estimate a slightly lower ARV than $250,000. If a similar house sold for $200,000 but had one-less bedroom, you might estimate a slightly higher ARV.

Learning to estimate the ARV is both a science and an art, but the more you do it, the better you’ll become.

Of course, this is a very simplistic description of determining ARV. To learn more, I’d recommend reading “Estimating ARV Primer” written by J Scott, author of The Book on Flipping Houses.

house flipping

3. Consider Partnering

In the beginning, I tried to do everything myself.

But here’s the thing:

I’m really crappy at a lot of things.

Today, I’ve realized this. And I’m not ashamed of it — I use it to my advantage. I maximize what I’m good at and find others who can compensate for my faults.

For me, that often means using a partner when I flip houses.

For example, for the longest time I had no money to flip houses. So I used a partner to help with the financing. I find the deal, I manage the flip, they bring the cash. (You can learn more about this in my book, The Book on Investing in Real Estate with No (and Low) Money Down.)

Today I use a partner because I’m too busy to flip alone, so I work with a partner who has the time to be the “boots on the ground” while I work on the financing and deal funnel parts of the business.

The beautiful part about a partnership is that 1+1 doesn’t always equal 2. With the right partnership, 1 + 1 can be far greater than 2. In other words, two people can often accomplish FAR more than twice what one person could. This is because each person is working on what they do best and letting someone else do what they do best.

So should you partner on your next flip? Maybe. Maybe not. But at least be open to the idea, and keep an eye out for someone who can cover your faults.

Because we both know you have them!

flipping

4. Weird Houses = Bad Idea

House flipping is often the most profitable when it’s the most boring.

This is because trying to flip “weird” houses often results in disaster. The best house flippers I know flip the same style house over and over and over.

They use the same materials.

The same colors.

The same crew.

Yes, it’s boring. But it just works.

I’ve gotten myself into trouble in the past by trying to flip “weird” houses. For example, the flip I talked about earlier, where I thought the ARV would be $170,000 but ended up selling for $120,000? That was a weird house. It was far bigger than most other homes in the area. It was a duplex that I turned into a single family home. It had an incredible view of the ocean, which I thought would make it more valuable.

Related: 5 Smart Ways to Reduce Your Fix and Flip Expenses

However, because it was weird, it was incredibly hard to hit the ARV correctly.

When you get into house flipping, it’s important to flip the most common houses that people want to buy. If everyone wants a 3-bedroom, 2-bath home in Neighborhood B, why flip a 5-bedroom home in Neighborhood D? Flip what people want to buy!

Yes, it’s boring.

But you can’t complain when the money starts rolling in.

Is the Answer to my Contractor Problem Starting my own Company?

5. Keep Your Contractors on Task

One of the reasons many investors end up failing on their house flipping journey is because they fail to correctly manage their contractors.

If left uncontrolled, even a great contractor can double your budget and your timeline. It’s your job to manage those contractors correctly and keep them on task.

One way to do this is to only hire the best contractors. Screen carefully, call references, and work with people who are ambitious and are quality craftsmen.

Once you begin working with the contractors, always leave the contractor “hungry” and wanting more money. Never pay everything up front, but only release funds once benchmarks have been achieved on the job site. This ensures the job gets done quickly and efficiently.

For more tips on managing contractors, don’t miss 8 Simple Tips for Managing Contractors Without Losing Your Mind.

Conclusion

There you have it! Follow these five tips and you’ll never make a single house flipping mistake again.

Just kidding.

Of course you will.

But follow these five tips, and you’ll definitely make fewer mistakes. These tips reflect some of the biggest mistakes I’ve made on my house flipping journey, and it is my hope that they will allow you to avoid the same mistakes.

If you enjoyed this post, I need to ask three simple favors:

  1. Share this on your FB or Twitter wall. It helps spread the word about BiggerPockets.
  2. Comment below and let me know your thoughts. Do you have any other tips you want to share? Questions about anything I said? Let’s talk!
  3. Sign up for this week’s webinar, How to Analyze a Fix and Flip Deal (And Avoid Getting Burned!). See ya there!

About Author

Brandon Turner

Brandon Turner (G+ | Twitter) spends a lot of time on BiggerPockets.com. Like... seriously... a lot. Oh, and he is also an active real estate investor, entrepreneur, traveler, third-person speaker, husband, and author of "The Book on Investing in Real Estate with No (and Low) Money Down", and "The Book on Rental Property Investing" which you should probably read if you want to do more deals.

12 Comments

  1. Amit Patel

    I’ve always used Realtors to help me estimate rental income or property value. I pay them a little bit for the help but I feel like I’m so biased that it helps to have someone who does this for a living tell me what it will rent for or what it can sell for. For rental income, I will also search through Craigslist, Hotpads, etc. to validate what the realtor said as sometimes they have their own biases.

  2. John bennett

    You’re awesome Brandon, and outrageously busy! Everywhere I go on bigger pockets, it seems u r there, i feel like I have a wallet size photo of u etched in my brain, and I’m thinking that that isn’t such a bad thing. U need to write an article on how much free time u have with a passive income, or have u already?
    Seriously though, thanks dude, for being available. I’ve learned so much from all of u, and from BP as a whole.
    On a personal note, the writing (Flow, humor, wit!) in this article was stupendous! To think that an informative article could possibly be fun to read literally (Ya like that play), well that borders on creativity!
    Peace.

  3. Susan Brand

    I’m absorbing everything you have on this site. For at the end of this month I am going to attend Fortune Builders 3 day seminar to absorb some more. I’ve bought and sold in the past but it was some time ago and want to see what has changed and to find a more effective way of doing things. In the past my biggest problem was the contractors. It took me 4 contractors to get one of my rentals up and running. Grrrr.. So I really don’t want to make that mistake again. Thanks for any and all help .

    • Will Barnard

      Please proceed with caution: fortune builders is (in my opinion) one of the biggest guru scams in the industry today. I highly recommend staying clear of them and not falling prey to their sales pitches. REI is not rocket science and I can assure you that what is working and legit today can be found right here on BP for free!

      On to topic at hand . . . As Brandon mentioned in this blog post, the math is essential to your success, do it wrong and you will lose, do it right and you are in the drivers seat to step and repeat. The other half of the math not mentioned is the renovation number. Get that wrong and you will almost always lose money. The two biggest questions regarding the math are always how do I find the accurate ARV (it is a science AND an art) and how do I calculate the rehab costs. The answer is not so simple to explain here, but it is not difficult to learn. Practice, more practice and practicing in the field is crucial to this learning process. I have said many times before, to estimate rehab costs, you do not need to know how to swing a hammer, only know how much it should cost and how long it takes to swing it.

  4. Patrick Donley

    Hi Brandon: Great article! Thanks so much for sharing your thoughts and perspectives on flipping. I”m wondering when you partnered when you brought the deal and managed the flip, if it was a 50/50 split? I’m currently considering a partnership where i’m bringing everything to the table in terms of making the flip happen, and my partner wants me to kick in 25% to have skin in the game. I’ve done several rehabs and he knows I’ll do the rehab right…as in boring and straightforward…Curious what you think of doing a partnership with a 75/25 split on costs when I’m bringing everything to the table and he is just a financial investor?? Thanks….Patrick

  5. tim boehm

    Hi Brandon, great article and much useful information for the beginner. I however have been in this game a long time and have done very well. Recently one of my tenants Father said to him “how come Tim gets all the good deals and I can’t find one” and his son said to him, “dad you could have gotten that good deal then hired Tim for a quarter million dollars to fix it for you.”
    The one big mistake I think most people new to this type of work do is try to add their personal taste to a property. You would be surprised how many houses I look at and think, if only they hadn’t painted every wall a different color they could have gotten 20k more for this house, or had just been better painters.
    I always look to see exactly what is selling in a certain area when planing a remod, HD and Lowes are good places to start getting an idea of what people are buying.
    When I build a spec house I ask the local realtors “What do I need to do to make this house sell quickly”

    • Katie Rogers

      In my community, rehabbers want to put in all stainless steel appliances, french-door fridges, front-loading washing machines, clear glass showers and mirrored closet doors, all of which I hate, and I do not want to pay twice: once for the rehabber’s choices, and again to replace all that. I wish the rehabber would at least be willing to replace the appliances with ones I like, and use those appliances in another house. But no, they won’t do it.

      So I prefer to buy houses that I fix up with sturdy, good quality materials and workmanship in neutral colors while avoiding “trendy” stuff.

  6. Lydia S.

    It’s a great reminder that inexperienced investors such as myself should consider focusing on ‘boring’ homes, as you’ve described them, until getting our feet wet.

    I see myself noticing the unusual homes and the wheels start turning about ‘how cool that one would be to flip’!!

    The consequences could be either great or disastrous and must be considered as such.
    Thanks for these points and sharing what you know.

    • tim boehm

      Hi Lydia. It’s easy for me never to lose and I haven’t in over twenty buys and sales. I apprenticed in plumbing, electrical, drywall and every skill it takes to build a house and I do all my own work. I have a great partner that works with me (my wife of 43 years). She worked as a professional Landscaper and does a fantastic job, we always get oohs and awes on our projects.
      I try to get people to understand one thing, how can you find gold if you don’t know what gold looks like. This means looking at property every day, if just on the internet. The more you look and learn skills, the more you will know when a contractor hits you with a highball. We recently hired a contractor for this job, he was a professional tree feller, he had to climb the trees and cut them from the top down. This is one skill I do not have, though I do in fact have the equipment to do it.
      We never had a TV in our home, because we would have never had the time to watch one. Our time was spent learning and studying things like plumbing, wiring and all things related to building and selling property. This internet to me has been the greatest invention since the wheel, instant access to knowledge and material costs. We started with nothing, one high school education between the two of us, and now we are in the top one percent of NW individual
      No need to wish you luck for luck has little to do with winning in this game. And remember if a couple of poor kids with little formal education can do it so can you!

  7. christian sifuentes

    Thanks Brandon being new to the site I am learning everyday I log on. Any future or past podcast that can help with finance would be great! I am looking to do my first flip and am unsure what financial route to go. Don’t have cash but have been approved for an Investment loan with 20% down.

  8. Hey Brandon, you mentioned that for a time, you couldn’t flip because you didn’t have the capital. Have you ever used something like a 203k loan to purchase & rehab or renovate a property?

    Considering one myself since it only requires a 3.5% down payment, and they’ll give you money to pay for the upgrades.

    Any thoughts?

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