Lessons from a first-time flip

By Gray Siegel

My wife and I have wanted to get into house flipping for a long time. I mean a really long time, like 5-10 years. But we were timid by a fear of the unknown. House flipping can be risky. There’s no guarantee you’ll make money, even if it looks like everyone on TV does. It looks like a no-brainer, right? We were realistic enough to know that not every deal was going to be a big money maker. But one way we eased our comfort level was to think about flipping a house like this…if a house needs work, and these TV first-time flippers can do it (most of the time), then why couldn’t we? After all, most of the DIY projects done in a flip, we’d already done ourselves. Why sit back and watch other people do this? Why not take a stab and try it ourselves? When a house gets remodeled for a flip, there’s no reason it can’t be us who does the remodeling.

Ok, so now that we’d boosted our confidence level, we decided to dive in. We did our research, created an LLC, opened up a bank account, found a realtor, and started hitting the streets. As it turned out, finding a house was the toughest part of the flip! Our local real estate market is pretty strong, and houses turn over pretty fast. But we finally found a house and got to work. Since we’d never done this before, we tried to have realistic expectations. Our top priorities were to see how well we could stick to our budget and our schedule. In fact, we tried not to focus on making a profit at all, so that we could work on our processes. We knew that in the long-run, getting fine-tuned processes nailed down would serve us better than just worrying about making money.

The following lessons are things we stumbled over, err, I mean learned along the way, during our first-time flip.

Do your research

I’ve watched house flipping shows on TV for as long as they’ve been on TV. But I’m an avid backseat driver when I watch them. I can point out all of the mistakes before they’re made, and I always have lots of VERY helpful advice for the flippers (insert sarcasm emoji here!). But you can actually learn alot from these shows, too. Learn from the mistakes other people make so that you don’t make the same ones (but you probably will- we did). You should research the areas where you’re looking to buy- figure out what the comps are, how good the schools are, what the crime is like, and anything else you can find out. It’s much easier to sell a house quickly in a sought-after area.

Be ready for anything (I mean anything)

We learned early on that crazy stuff can happen at a house that you don’t know too much about. When we bought our first flip house, we were so excited to get inside and start working. I remember walking up to the house one morning, opening the door, ready to get to work, and as I looked into the kitchen, I saw a raccoon walking into the room. We locked eyes, he scurried off, and I backed out of there as fast as I could. So we had to find a raccoon guy (check Google- they exist!) on Labor Day weekend and hope that we could get them out to set a trap without losing too much work time on a long weekend. To make a long story short, after many traps, lots of different bait (fish powder, brownies, PB&J sandwiches, and candy bars), and 2 weeks later, we finally got rid of them. We caught 2 of them with a trap (see the photo), and believe it or not, we got 2 more of them to walk out the front door once we finally worked up the courage to open it up. They were desperate to get out, and we were desperate to get them out, so it was a win-win. So yeah, we had 4 raccoons living in the house for the first 2 weeks. Talk about squatters. That set us back a little bit, but it gave us some perspective about what we could expect from our flip.

Be ambitious, but also be realistic

My wife and I are big time do-it-yourselfers. We like to do anything we can ourselves, rather than ask or hire someone else. For most of the things that needed to be done at our first flip house, we’d already done them ourselves. If you plan to do most or even alot of the work yourself, it’s important to be flexible. While you might be able to do these things, there will probably come a point where it might make sense to hire someone else to do a job so that you can do something else and keep the schedule moving. Don’t think of this as a pride thing, Mr. Macho, it’s more of a “work smarter, not harder” thing, and it’s important to be able to adapt and change your plan along the way.

Give yourself more time & money than expected (poop happens)

We’ve all seen the house flipping shows on TV, especially the first-timers, and seen how the couples go over budget and can’t finish on time. I’m a “research things to death” kind of guy, and before we bought our first house, I researched E-V-E-R-Y-T-H-I-N-G. Twice. I had my spreadsheets for budgeting, profit/loss, you name it, I had it.

But as detailed as you are, once you get into your flip, things happen. Like things you didn’t see coming, even when you try to budget for things you didn’t see coming. They happen. It’s ok. You just have to roll with it, make adjustments where you can, and move on. The point is, our first flip went over budget and took longer than expected. We found a water leak, then a water pipe blockage, had to bust up some concrete, and then we found a broken toilet flange, all in the same bathroom. The smallest room in the house ended up costing us $1,300 more than expected and set us back time in the schedule. It happens. Some good advice here is to plan for the worst, and hope for the best.

Set a schedule

OK, so you just read the section telling you that you’re probably going to go over budget and over schedule. Hopefully you won’t, but you might, so just be prepared for it. One thing you can do to hold yourself accountable is to set a schedule. Going in, my wife & I planned for 2 months of remodel time and 1 month of selling time. We went over our schedule by 3 1/2 weeks. Looking back at all of the work we had to do, along with the unexpected setbacks, we agreed that 2 months was over-ambitious. BUT, since we set a schedule, we were constantly asking each other what we needed to do to finish on time. This kept us aware of the urgency to get things done and keep things moving along. If you need to adjust the schedule along the way, that’s fine, but it’s a good idea to have one. Otherwise, things might just linger and take longer than needed.

Keep track of the money

Keep track of all of it.This is really important. It’s also the most tedious part of the project. But if you really want to know if you’re staying on budget, it’s crucial. We keep a spreadsheet that we use to log every expense. Because we knew our repairs budget going into the project, we compare this to our running expenses total, and we can gauge if we’re staying on track, and how much repair budget we have left. Plus, you’ll be able to easily calculate your profit (or loss) once the house sells.

Safety

I put this section right before the next one for a good reason. Safety. Please folks- use your noggin here. I can’t count how many TV shows I’ve seen where DIY’ers are knocking down a kitchen cabinet or a wall without any safety glasses, good shoes, etc. It doesn’t take much for a piece of something to fly into the air and into your eye or your foot. This would really ruin your day. Be smart. Be safe. There’s your public safety message, short & sweet.

Demo Day

We’ve seen it on the TV shows- we’ve even seen the t-shirt. It’s the most exciting part of the flip. You get to bust out your sledgehammer and bust out everything in the house that isn’t staying. I’ll say this, yes, it’s fun. But as crazy as it looks, try to have a method to your madness. One thing we found is that we didn’t demo enough up-front. We tore some things down, threw them away, and then starting remodeling. But there seemed to be other projects along the way which needed more demo work, and we kept making messes when we should’ve been putting everything back together. So try to do all of your demo work up-front. Figure out everything that needs to be demo’ed and don’t put it off until later- do it first. But watch out for the warning in the next section…

Don’t uncover more than you need to

You should understand that during your flip, you’re going to find things that need to be fixed that you didn’t expect. For example, you might open up a wall and find some rotten wood. I guess this becomes something of an ethical deal, and it’s really up to each individual flipper, but whenever we find issues like this, we feel that we need to take care of them. For example, during our initial inspections before we bought our first house, we had a foundation inspection which came up clean- no work needed. Unfortunately, once we got into the house and tore out the carpeting, we uncovered a pretty decent foundation crack which could only be seen at that point. I suppose this could have been covered back up, but we felt that we needed to take care of it. Luckily, the foundation company we used recognized this and gave us a great break on the cost. They even mentioned to me that they knew a number of folks who might not have been as ethical as we were. The other side of this moral lesson is to get really good inspections up-front. As I said, our issue could only be seen from the inside of the house once the carpet was gone, so there was no way of knowing. But in general, a good inspector can save you alot of money later on, or at least help you identify expensive repairs for you to work into your budget.

Take pride in your work

Shouldn’t this go without saying? Probably, but I’ll say it anyway just as a friendly reminder. The work you do on your flip house is a reflection of you (and your business if you formed one). Think about it as your reputation. This translates to the quality of the work you do on your projects. Don’t cut corners and be careful not to work so quickly that your craftsmanship takes a back seat. Remember, your flip house should be a turnkey house for your potential buyer, not a honey-do list for them. You don’t want to find out that they didn’t buy your house because there were too many little things they’d have to fix once they moved in.

Your flip house is not your forever home

Many flips are often “lipstick on a pig”, not a plastic surgery facelift on that pig. When we did our first kitchen remodel, the cabinets looked ok, but not great. We planned to paint them, but first we had to sand & strip many years and layers worth of paint, paint, paint, stain, and some varnish off. The cabinet doors had a groove in them which made it tough to sand or strip, and they weren’t in terrific shape anyway, so I decided to make some new custom cabinet doors instead. I’m a pretty decent woodworker, so this wasn’t a really tough assignment, until it became one… There were 26 cabinet doors which needed to be made (actually, I made 29 total because my measurements were wrong on a set of 3 of them!). Anyway. The cost for the wood and the time to build them set us back more than we budgeted. While the doors look much nicer than the old ones, we probably could’ve made the old ones look decent enough to work with.

Don’t get me wrong- I’m not a “do things just good enough” kind of guy. In fact, I used to have a sign at my desk at work that read “Good enough isn’t.” But in this case, and in many cases of flipping houses, you have to decide what’s good enough to get the job done in an acceptable way, because this house isn’t going to be your forever home. It’s going to be a house that you sell to someone else and move on to the next one. You can’t afford to get too deep with each of your remodel activities, unless it really makes sense. In our case, we justified it because kitchens (and bathrooms) sell houses.

Eat well

If you’re planning to do most of the work yourself, you’ll be at the house alot. If you have a day job, you’ll be there after work and all day on the weekends. This means you’ll be away from your kitchen, so you need to plan to eat well. It’s tempting to grab some fast food for lunch or after a hard day’s work, but this can really add up- not only is it expensive, but it’s not healthy. Get into the habit of packing a cooler with a sandwich or something healthy to eat so you won’t be tempted by a quick fast food meal.

So there you go- these are our lessons learned. And I even threw in a bonus lesson to help you stay healthy! I hope that these lessons give you a little more insight “from the trenches”. Our first flip didn’t go perfectly smoothly, but we’ll learn from mistakes and refine our processes.

On to the next one!