Is There a Chance That I’ll Lose Money Flipping Houses?

While it is always possible to lose money flipping houses, you'll be able to increase your chances of making a profit if you avoid these mistakes!

While it is always possible to lose money flipping houses, you'll be able to increase your chances of making a profit if you avoid these mistakes!Is there a chance that I’ll lose money flipping houses? It’s the question that troubles all new real estate investors, after all no one wants to lose money! Investing is risky, there’s no doubt about it. If you decide to invest in the stock market, you are always going to be at risk of losing money. Returns on stocks aren’t guaranteed, so you could end up losing more than you initially invested. However, if you try your hand at real estate investing, while there is still risk involved, your chances of making a profit are much higher. Over the years, Tarek and I have found that one of the best ways to decrease our chances of losing money on a flip is to avoid making these mistakes!

DOING ALL OF THE WORK BY YOURSELF

While doing all of the work by yourself may seem like the cheaper (although certainly not easier) route, it can actually end up costing you more in the long-run. Taking the time to learn how to make all of the repairs and then actually doing them by yourself can take weeks and even months to do! While you’re busy trying to figure out how to rewire the kitchen, you’re wasting precious time that could be spent on flipping another house or two.

Instead of doing all of the remodeling work by yourself, hire out a contractor, plumber, electrician, whoever you need to get the necessary repairs done. This way you’ll save yourself not only time and money, but a major headache as well.

BUYING A PROPERTY THAT REQUIRES TOO MUCH WORK 

That 100-year-old property listed on the market for $100,000 may seem like a real gold mine, but in reality it could actually be a money pit. If a house needs an entire roof replaced or is infested with termites, you may as well go look somewhere else. You could easily sink all of your money (and more!) into a house like this. Don’t pay more to repair and remodel a house than you actually paid for it.

UNDERESTIMATING TIME AND BUDGET 

I’m sure you’ve heard it a million times, but inaccurate estimates can be a huge killer! If you are pretty new to the real estate investing game, you certainly should get some help when making your estimates. First, I’d recommend hiring an inspector to help you determine the repairs that will need to be made on the house. From there, you and your contractor will be able to work on pricing out the work and materials needed. Instead of just making a wild guess about how much time and money you’ll need to fix up the house, you’re estimates will be much more accurate if you have an inspector and a contractor on-board.

OVER-REHABBING 

You may think that every kitchen needs stainless steel appliances and granite countertops, but spending that kind of money on a flip can be a huge problem for your budget! While no buyer would hesitate at the sight of beautiful new appliances and countertops, not all remodeling expenses are going to be recouped after selling your flip.

I know that getting caught in the trap of over-rehabbing can be so easy, but it can also easily put you over-budget. Instead of spending your entire budget on rehabbing, make small adjustments where you can. While that hardwood flooring may be tempting, go for the laminate instead. Laminate flooring is equally as beautiful, yet you’re buyers probably won’t be that particular (depending on the neighborhood) and you’ll be able to recover your expenses when you sell the house.

PAYING TOO MUCH FOR A PROPERTY 

This happens all of the time, especially to new investors. It is all too easy to just make an offer not too far from the listing price or just completely skip over the negotiation process altogether. While this may seem like the “easy way” out, NOT negotiating will actually hurt you! Home sellers are usually more than happy to negotiate the price of their house, especially if they really just want to get it off of their hands. Don’t be afraid to make a low offer on the house. I like to keep in mind that if I’m not embarrassed by my offer, than my offer is too high!

ADDITIONAL RESOURCES 

5 Upgrades That Won’t Make You Money
5 Home Renovations That Aren’t Worth Your Money
5 Flips That Aren’t Worth Your Time or Money

Like any other investment, it is possible to lose money when flipping houses. But if you know what mistakes to avoid, you’ll be able to make a profit! If you’d like to learn more about making money from house flipping, you can check out our Success Path Education workshops which will teach you everything you need to know about how to make a profit off of your flips.

For more answers to frequently asked questions, visit the Success Path FAQ.

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