HGTV makes flipping houses seem glamorous. But they don't show you the hard labor, long hours, and extensive capital it takes to finish renovations. Unexpected issues arise, and you never know if your first flip is going to be a success or a failure. Sometimes, buyers discover something awful about the house a little too late; other times, they just ignore red flags, particularly when it comes to building codes.
Reading about these Redditors' failures might just save you the headache of a house-flipping catastrophe.
From Redditor /u/seb1080:
I recently closed on a flip from hell that delivered a huge financial blow for me (all in all, close to $30,000 loss). I am pretty discouraged about it. It is one of my first flips, and I can only blame myself for the mistakes made; mainly not buying low enough, and being too optimistic about the ARV [after repair value]: $177,000 purchase, $265,000 ARV. The standard rehab went about $10,000 over budget, plus a few more repairs called out by inspection, but the real kicker was a busted water line due to a freeze five days before closing.
This cost me $2,200 in cleanup, $1,600 in further water line replacements, as well as new carpet. At the end of the day my rehab was $15,000 over budget...
The house sat on the market a long time; meanwhile, I was paying the hard money lender 12% interest. I got tons of showings, lots of activity, and good feedback, but no offers. I started lowering the price. Finally, an offer came in well below my asking price, so I met the buyer almost halfway. It was $15,000 below my reduced asking price, $25,000 below my original list price. With my HML [hard money loan] due after month six, along with the almost no offer activity, I decided I didn't have much of a choice.
Years of savings have been wiped out and I feel like I am pretty much starting over...
From a former Redditor:
I went online and found the best-reviewed contractors I could find, and vetted them. We worked out a deal to get the work done for $75,000, and they would get a bonus on the back end when it sold (another $75,000), contingent on timeliness and completeness.
Everything went great at first. Then, dates started slipping by a lot, I noticed they were substituting cheap materials, and they weren't doing some things I asked for. Nevertheless, the house was 97% complete, and the project was well over a year in.
When we significantly passed the date on the contract, they were sure they weren't getting their bonus, and I finally had run out of money to keep paying the mortgage. I had even sold my own home to keep making the payments for the previous six months, as I was no longer consulting [to focus] on this project full time... Everything finally spiraled into oblivion from there, and I could not save it.
The contractor filed a lien for the bonus and stopped working, even though they didn't earn the bonus, according to the contract. We listed the house frantically (1% commission), staged it a little early on net 60 terms, and did several open houses, decreasing the price dramatically in hopes that I could get out quick and at least break even. But the house wasn't finished enough for the price point.
Then, a couple months (and $150,000 of my own money) later, I moved to California to start a new job, and it was all finished. It foreclosed. The bank called me to thank me for working with them every step of the way, and that they were not going to report the foreclosure to my credit.
From Redditor /u/dreadpirater:
My first flip I bought as an REO [real estate owned] for $42,000, put $20,000 into the flip, plus a TON of my own time (I redid the hardwood floors myself, pulled all new wire, painted, countertops, tile - essentially I paid for plumbing, connecting the new electrical panel, and a little bit of masonry touchup), and sold for $92,000.
The flip took me six months. It sat on [the] market for five months because I didn't know enough to evaluate how location affected the comps, and I was stubborn and wanted what I wanted out of it. Lessons learned.
When I repaid the family loan for the purchase... the Realtor and closing costs... etc... I'd made less than if I spent those 11 months working at Walmart, for sure.
From Redditor /u/NerdDawgs:
Took over a year and a half to complete thanks to getting my newbie [butt] handed to me by three different contractors... but I was finally able to sell both - one at a $3,000 loss, and the other I got lucky as the area appreciated during my extensive holding period so we made about $30,000.
I was thinking about taking on a bigger project after taking my licks with these two smaller deals, but now I'm convinced to just stick with lower- to median-range homes.