I’ve flipped hundreds of houses, managed multiple 7-figures in construction, and done the vast majority of it remotely. I’ve lived in San Diego & Florida for my wife’s career as a Navy Psychologist and flipped properties in St. Louis, Indianapolis, Louisville, Pensylvania, and Baton Rouge that I’ve never even seen.
In this quick article I’m going to walk you through nine things I wish I would have known before I flipped a single house!
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Author Ryan Dossey (8-figure real estate investor, serial entrepreneur) shows you his early mistakes in growing his off-market REI business.
Mistakes that can ADD years to your goals.
#1: Write out your own scope of work
A lot of flippers (especially newbie ones) make the mistake of finding a general contractor, asking them to walk a property, and then giving EXTREMELY vague answers about what they want to be done.
Early on I used to say things like, “Make it rent read!” or “We need a new kitchen.”. The problem with this approach is that rent ready or a new kitchen can mean VERY different things to different people. I had a contractor once not install blinds or closet doors… that was his idea of rent ready. I had a contractor not include appliances in a bid when I assumed he did. (Notice I didn’t communicate what I actually wanted.)
My team now goes room by room and writes out EXACTLY what we want a quote for line by line. This doesn’t leave any room for ambiguity regarding what was included or not included in their bid.
#2: Always get multiple bids
I always recommend getting a minimum of three bids done on any projects. Price is NOT everything but it is important. As investors we often have a $ amount that we NEED to get the project done for. The old saying goes that you can get speed, quality of work, or a low price… pick two.
We often don’t go with the cheapest contractor but we rarely pick the most expensive guy.
By having them quote out your scope you know that you’re comparing like to like with everyone. We ask them to itemize the bid so we can see what they’re charging for what.
Contractors will often quote the parts of the job they don’t really want at a premium.
#3: Match the asset class
One of the first BIG flips I did was a $150,000 remodel (not a great idea as a newbie) on a 500k house and it kicked my butt. I was used to doing 250k houses that needed small rehabs not managing a six figure + rennovation.
I put in the materials that I was used to (cheaper granite, tile, flooring, etc) and what I learned the hardway was that people buying a 500k house are SIGNIFICANTLY more picky than someone buying a starter home.
We ended up selling for over $60,000 less than I thought that we would due to my lack of experience. I HIGHLY recommend working with an experienced Realtor that can help guide you through what the marketplace expects in that asset class vs guessing.
The flip side of this is to not OVER rennovate. Anyone can spend more money than they should remodeling a house so it looks nice. Providing safe, clean, and livable housing that matches the area (and generates a profit) is much more of an artform.
#4: Don't be cheap on pictures
People no longer personally walk dozens of houses with a Realtor… They hop on Zillow, look for a house that they think they like, and have their Realtor set up a showing.
It’s paramount that you have professional pictures taken AND edited to increase the brightness/appeal. If your Realtor tries to take iPhone photos and call it good… fire them lol.
According to the National Association of Realtors properties with professional pictures gained 61% more attention!
Protip: You might even checkout BoxBrownie for virtual stanging if you want to make your pics REALLY pop!
#5: Only flip what's "typical"
I focus on flipping only what is expected for the area that I’m in. If I’m in an area with 4 bedroom 2 bathroom houses with fenced in yards I’m not flipping a 700sqft 2 bedroom 1 bathroom house.
My first flip I ever did (back in 2014) was a 700sqft 2/1 with a shared driveway and I learned this lesson the hardway. I ended up having to sell that house at a $7,500 loss. Nothing like paying someone to buy a house from you.
*quick rant: This is why I HATE when coaches tell people that they can do deals with no money or experience. What happens when you go over budget or mess up? Your private lender or bank isn’t eating that loss… you are!
#6: CompanyCam for management
I’ve extensively used an app called CompanyCam where our contractors and staff can take photos anytime they’re on the job. It’s a great way for us to track progress/activity and provides a great shareable link of before/during/after photos. Our banks/private lenders seem to love following along in real time.
Anytime my staff are on the jobsite we require them to take pictures same thing with our general contractors).
When you have 20+ projects going it’s a fantastic way to remotely check in on where things are at and what projects are lagging.
#7: Debt is almost always cheaper than equity
When I first started out flipping houses I didn’t have a ton of cash so I’d partner with a “capital partner” that would fund the deal while I did everything else.
I started out giving up 50% of the profit and very quickly realized I was paying a STUPIDLY high APR vs. even what hard money would cost me.
Nowadays we use “private money” which is just a fancy way of saying I borrow money from individuals. Hard money ends up being around 10-12% APR with private money I’m around 8-9%. I’ll embed a video on raising private money below.
#8: Don't set records move volume
I see flippers often make the mistake of trying to set records with what they sell their houses for. Comps might be 350k but they list at 369k.
The problem with overpricing your houses is that they’re going to get less attention, be harder to appraise, and even if they’re beautiful they’ll sit.
I’m all for maximizing the return on your investment on a flip but getting in and out is better than sitting on the market for 6 months. Especially where we’re at in the market!
#9: Get professional inspections done
I used to have my general contractors do a simple “walk through” for my inspection and this cost me an absolute fortune. When I go to sell a house I know that the buyer is going to have somoene in the attic, in the crawl, and scoping the drains… I want to know what they find BEFORE it’s my problem.
It’s signficantly easier to retrade with a seller due to issues than eat “oopsies” during a remodel.
Actual things they missed:
A roof on a 9 unit apartment complex that caved in the day after we bought it.
Knob/tube wiring sections (more times than I care to admit).
A failed boiler system in a 5 unit.
… just to name a few
I know a lot of investors pride themselves on saying they don’t do retail inspections (that used to be me) but it is so worth the few hundred bucks to know what you’re getting yourself into.
I didn’t come from a construction background and I had to figure a lot of this stuff out myself the hard (expensive) way. I hope that these nine tips are as helpful for you as they’ve been for my clients in our mastermind group CCF.