The art and science of house flipping may have lost some of its luster last year, but the practice can still generate thousands of dollars in profit — even for first-time flippers.
Americans flipped 297,885 single-family homes and condominium units in 2024, down from 322,782 in 2023, according to real estate analytics firm ATTOM. Industry onlookers said real estate investors are likely slowing their flipping efforts because profits are not increasing as much as they would like.
Still, professional home flippers say turning a hefty profit is all about avoiding miscalculations that could cost you time and money. Here are the five most common mistakes first-time home flippers make and how to avoid them:
1. They pay too much
First-time home flippers are often too eager to start a project and end up paying more for a home than it's worth, said Danny Johnson, a San Antonio-based flipper who owns DannyBuysHomes.com.
"If you pay too much for the house, you're going to be stressing about it the whole time, and maybe you won't do all the [repair work] things you're supposed to," Johnson said in an interview.
The key to profitable home flipping, Johnson and other experts said, is making sure you purchase and repair a property for as little money as possible while selling it quickly for the most the market can command. Overpaying for a home already eats into that potential profit, Johnson added.
To avoid overspending, the first-time flipper should do the math, Johnson said. Take 70% of the dollar amount you want to sell the house for and subtract it from the dollar amount you have budgeted for repairs.
For example, if a flipper wants to sell a finished home for $100,000 and has a $10,000 repair budget, the person should subtract the $10,000 repair budget from $70,000 (70% of the target sale price). The $60,000 generated from that calculation represents the highest amount a flipper should be willing to pay a homeowner for their property.
Paying the right price on a home is tricky, but "it's all about not letting your desire [to flip] cause you to overlook what the numbers are telling you," Johnson said.
2. They take the DIY approach
Many first-time home flippers are not experienced general contractors, but they mistakenly try to perform all of the renovations without hiring a professional, Johnson said. It's tempting to take the do-it-yourself approach, but experienced flippers know going that route will only cost them in the end, Johnson said.
Erik Wright, owner of Tennessee-based New Horizon Home Buyers, said he learned the no-DIY rule the hard way years ago when he purchased one of his first properties for flipping. Wright said he wanted to save money and do all the repairs himself.
"I ended up spending four months working on it, nights and weekends, hardly ever seeing my wife or my kids, who were little," Wright said in an interview. "I came out in the negative because it took me so much longer and the quality of the work wasn't as good."
Wright said first-time flippers should learn from his experience and realize that hiring a professional is quicker and less of a headache.
"It would have been cheaper to pay the contractor to do it," he said. "They would have finished it in three weeks maybe."
It's OK for a first-time flipper to paint walls, change faucets and switch light fixtures, Johnson said, but for anything dealing with the plumbing, the roof, electrical or HVAC, just call a general contractor.
3. They forget the 'soft costs'
The novice home flipper does not take "soft costs" into account when offering to buy a property, Peter Souhleris, a real estate investing expert in Massachusetts who has been flipping homes for 30 years, said in an interview.
Soft costs are the fees a buyer pays when purchasing a home, including the homeowners insurance, title insurance, points to pay down the mortgage interest, permitting fees for when remodeling begins, possible commission fees and sometimes legal costs.
The problem with forgetting soft costs is that the flipper will end up paying more for the home than he or she originally budgeted, a mistake that could also slice into the profit, Souhleris said. To avoid this, a flipper should take 10% of the home price and add that figure to the total price that would be paid to acquire a property. In other words, if a flipper buys a home for $80,000, it’s good practice to set aside $8,000 also to pay the soft costs.
4. They estimate inaccurately
First-time home flippers often struggle with how much money it truly takes to renovate a house and get it ready for sale. The amateur flipper will budget money for renovations, but that budget often grows because contractors will point out other surprise repairs that are necessary, Souhleris said.
“The biggest mistake they make is underestimating repairs because you can’t see behind walls,” he said.
The best way to avoid underestimating is to get price quotes from three different contractors, Souhleris said. Flippers should then compare those prices to what they can afford to spend on renovations and build a budget that meets in the middle.
5. They price it too high
After the repairs have been finished, first-time flippers often list the home with an asking price that's too high, Wright said. A home that's too pricey will sit on the market for months, forcing the flipper to continue paying the utility bills, mortgage and insurance, eating away at the profit, Wright said. A home that has sat for months will also prompt would-be buyers to place lower bids, Wright added.
To avoid this, Wright said, first-time flippers should go online and learn how to do a comparables, or "comps," report. The report will reveal how much other buyers have paid for similar-sized homes in the neighborhood, Wright said. After that, find an experienced real estate agent and ask that person to build a comps report, too.
Armed with those reports, first-time home flippers will get a stronger sense of how much they should list their home for so it will sell quickly, Wright said.
"If you're not willing to spend a couple of hours learning to do comps, you shouldn't be flipping a house in the first place," Wright said. "You should be doing something else."