People Who Failed At House Flipping Share Their Stories

Redditor /u/seb1080:

I closed on a terrible flip that cost me nearly $30,000. I feel discouraged. This is my first flip. I blame myself for mistakes: not buying low enough and being too optimistic about the ARV. The purchase price was $177,000; the ARV was $265,000. The standard rehab went $10,000 over budget. More repairs appeared after inspection, plus a busted water line from a freeze five days before closing.

Cleanup cost $2,200. I spent $1,600 on water line replacements and new carpet. My rehab finished $15,000 over budget.

The house sat on the market long. I paid the hard money lender 12% interest. I got many showings and good feedback, but no offers. I lowered the price. An offer came in below my asking price, so I met the buyer halfway. It was $15,000 below my reduced asking price, $25,000 below my original list price. With my HML due after six months and almost no offer activity, I decided I had little choice.

Years of savings are gone. I feel like I am starting over.

From aformer Redditor:

I found the best-reviewed contractors online and checked them. We agreed on a $75,000 deal. They would get a $75,000 bonus if the house sold, depending on finishing on time and completely.

Work started well. Then, dates slipped. I saw them using cheap materials and skipping tasks I requested. Still, the house was 97% done. The project was over a year long.

When we passed the contract date, they claimed they would not get the bonus. I ran out of money to pay the mortgage. I even sold my home to cover payments for six months while I stopped consulting on this project full time. Everything fell apart from there. I could not save it.

The contractor filed a lien for the bonus and stopped working, even though they did not earn the bonus per the contract. We listed the house quickly (1% commission), staged it early on net 60 terms, and held open houses, lowering the price to get out fast and break even. But the house was not finished enough for that price.

Months later, plus $150,000 of my money, I moved to California for a new job, and the house was finished. It foreclosed. The bank called to thank me for working with them and said they would not report the foreclosure to my credit.

From Redditor /u/dreadpirater:

I bought my first REO flip for $42,000. I put $20,000 into the flip and spent a lot of my time. I redid the hardwood floors, pulled new wire, painted, installed countertops, and tile. I also paid for plumbing, connected the new electrical panel, and did some masonry touchup. I sold it for $92,000.

The flip took six months. It sat on the market for five months. I didn't know enough about how location affects comps. I was stubborn; I wanted what I wanted from it. These are the lessons I learned.

When I paid back the family loan for the purchase and covered the realtor and closing costs, I made less money than if I spent those 11 months working at Walmart.

From Redditor /u/NerdDawgs:

Three contractors gave me the newbie [butt]. It took a year and a half to finish. I sold both houses. One sold for a $3,000 loss. The other sold for $30,000 because the area gained value during my long hold.

I considered a bigger project after handling these two smaller deals. Now, I am set on sticking with lower- to median-range homes.

From Redditor /u/sonalogy:

This was the worst project. I lost about $200,000. That number gets bigger if you count the $500,000 equity tied up in the project. I cannot sell or use that money in the near future. This happened due to big risks, poor choices, and bad luck.

My father, who mentors me in real estate, has had deals where he lost much more than this.

Sometimes you see you will take a loss. You cannot change that outcome. You must finish the project to reduce the loss as much as possible. Finishing takes time and money. Then you must accept whatever offer you get just to exit the situation.

From Redditor /u/cadehalada:

Flipping houses is not what TV shows show. Finding good deals is hard. Returns are not as good or are misleading. Feeling your way through your first deal causes stress. The TV shows make it look easy and fun. It is not.

After the first deal, learn your market. Learn how to handle renters, repairs, and remodeling. Then you start seeing returns. This can be rewarding. But it is a risk; many people tried and failed.

From Redditor /u/Oax_Mike:

You need cash. You need a lot. Pay for the houses and all upgrades in cash. Can you skip cash? Sure, for less profit. Add financing costs and six to twelve months of mortgage payments. You could lose $10,000 to $20,000 in profit compared to someone who flipped with cash.

You only make good money fixing up houses with financing if you play the long game. Buy bad houses, fix them up, and rent them for over ten years before you fix up again and sell.

From Redditor /u/FutureSynth:

Your country's sales tax will cripple your profits, even if you cut renovation costs. You wait for a golden-opportunity home that is a real trash heap. Few exist unless you live in a cheap area where you struggle to get high sales even with improvements because the rest of the street is trash.

I don't say it's impossible. See it as a project instead of a business. Try one, learn from the experience, and move forward from there.

From Redditor /u/thesaunaking:

Location and price matter.

I lost money on my first place. It was too far from cities and too expensive for the area.

From Redditor /u/ZacQuicksilver:

This relies on a stable housing market. If the market stays steady, the work you do, especially cheap work that makes a big difference, makes you profit. If the housing market gives you rising prices, making a profit is easy.

However, if housing prices drop while you hold a house, you could get stuck with the house and the mortgage.

From Redditor /u/caverunner17:

Market conditions must be right. A hot market means few chances to get a house with that much upside unless it's an estate sale or short sale. You will probably need cash.

Slower markets allow more negotiations and options with less competition, but selling takes longer.

Also, you must know the area and neighborhood. If you take a $200,000 house and upgrade it to $400,000 level, but neighborhood listings are $250,000, you won't get $400,000 for it.

From Redditor /u/BeachGlassBlazer:

One house sat in a $500,000 neighborhood. It was bank-owned. They put a new roof on it; it had five bedrooms and five baths, a private yard, etc. But taxes alone were $40,000 yearly. The place was so big that 'easy fixes' like carpet and paint were huge.

Then I saw another house near a university, priced much lower than typical homes. It looked over a park. But everything was original; I guess the owner lived there until they passed and did nothing. So it needed full electrical and HVAC updates, removing asbestos ceilings, lead paint, mold, and trees in the basement and sunroom. Funny how these look great online.