The Realities of House Flipping: Lessons Learned the Hard Way

Monday, February 26, 2024

The Larossa Workshop Blog/The Realities of House Flipping: Lessons Learned the Hard Way

The Realities of House Flipping: Lessons Learned the Hard Way

A seasoned flipper's journey from frustration to understanding.

I QUIT Flipping Houses - Here’s Why​

I’m going to be really honest with you guys, flipping houses SUCKS.

After experiencing many successes and failures as a professional house flipper in St. Louis and Denver, I had become frustrated with the process. I cashed out on all of my rentals, moved to Chattanooga, and began fixing up a few properties myself. I figured I could do one or two flips a year on my own as a way to make a living, and accepted that I wouldn’t be able to use flips to get ahead.

In short, I had given up.

Working on these houses myself, day in and day out, gave me a lot of time to think.

I thought about the contractors I worked with, how I built budgets, looked for deals, projected my profits, and played the game of business itself. I also had to come to terms with the nature of this business, the final piece in understanding all of the reasons I quit flipping houses. Turns out, I made a lot of mistakes.

But I also discovered how to overcome them.

Let me explain how.

Reason #1: Dealing with Contractors SUCKS​

I know - obvious, right?

You’ve been there before. You meet with a contractor, agree on the scope of work, price, and timeline. He begins work and then disappears into what we call The Contractor’s Black Hole: he
hasn’t been to the jobsite in a week, hasn’t returned your calls, and then one week of absence turns into three weeks of no progress.

Although it’s impossible to completely avoid The Contractor’s Black Hole, you can take steps to protect yourself by managing your contractors well.

Managing contractors well comes down to three things which are simple in concept, but require consistency to execute:

  • ​Build relationships with contractors who understand your expectations​. 
  • ​Create a SMART SOW by setting your expectations at the beginning of the project. 
  • ​Hold them accountable: Continue to maintain your expectations throughout the project, and communicate to your contractors anytime they are not holding up to their side of the deal.

Reason #2: Budgets Always Get Blown

The type of houses we are buying are not like the ones you see on TV.

They are the epitome of “deferred maintenance,” and often have major issues with them. Whether it’s structural issues, water intrusion/damage, major plumbing/electrical problems, or replacements for the roof, HVAC, windows, or siding, you need to be prepared for these to take up most of your project’s budget. Some of these items will be easy to catch as you do your due diligence on the deal, but others may not be visible until you open walls or floors.

A quick note on your due diligence…It’s not uncommon to be in a situation where you have little to no inspection period before purchasing the property. Be prepared to devote what time you do have to looking for signs of these big ticket items.

Although there is no such thing as a perfectly planned budget, here are some ways to mitigate your risk:

  • ​Learn how to look for signs of deferred maintenance and how they might impact your budget. 
  • ​Build in 10% - 20% of contingency into your budget to account for those unseen items. 
  • ​Use a system of Project Management that accounts for the particulars of an investor-grade renovation.

Reason #3: Finding Deals is Exhausting

There are essentially four different ways to find deals:

  • ​Buy off the MLS (aka The Market)
  • ​Buy from a Wholesaler
  • ​Buy from a bank, at auction, etc.
  • ​Buy directly from a seller

All of them have their pros and cons, but your primary filter for choosing your preferred method will be determined by how much work you’re willing to put in. The more work you have to put into sourcing the deal, the smaller the market. The smaller the market, the better the deal.

Let’s review an example.

If you want to buy a house on the MLS through a real estate agent, it’s easy to find willing sellers and put in your offer. Since it was easy for you, it was easy for everyone else. The MLS gives you access to the biggest market and therefore, the smallest chance of scoring a great deal. Now, consider the opposite scenario. You’re sourcing and buying directly from a seller who doesn’t have the house listed at all.

This is much more difficult to pull off, but your reward will be much greater.

I’ll cover this topic in more detail later, but for now, keep these tips in mind as you look for deals:

  • ​Work with a realtor who knows the investment game and develop a system that allows you to quickly make offers with him or her. 
  • ​Get to know the wholesalers in your area. Be their best buyer, and make sure you are their first call every time they have a deal. 
  • ​Set up a simple website, dedicated phone number, and email address where you can be easily found, and then get that contact information out there. Make phone calls, send out mail, run online ads, etc.

Reason #4: Calculating ARV is Difficult​

If you miscalculate the After Repair Value of your house flip, you’re going to be in trouble.

There’s no foolproof method to being right every time. Finding the ARV or “comping a house” (looking for comparison sales of your property) is a game of statistics. You’re trying to determine the likelihood of your flip being appraised within a certain range after the renovation is complete. Miscalculations happen often. Overlooking neighborhood boundaries, personal bias (in favor or against) of a certain area, and solely trusting the opinions of others are just some of the ways you could be setting yourself up for disaster.

Like any statistical game, however, there are ways to stack the deck in your favor.

Learn to get comfortable utilizing the following methods as you review deals:

  • ​Buy Look up recent sales on a site like Zillow. This is almost always my first stop. I look for any recently sold house near the property I’m researching and find out what shape it’s in.
  • ​Using other 3rd party applications like Property Radar, PropStream, or my favorite app - The Chomperr.
  • ​Have your realtor give you a BPO (broker price opinion). Don’t abuse this one. Make sure they have an opportunity to make money from the deal somehow.
  • ​Do a self-appraisal. That is, don’t hire an appraiser. Take the time and do one yourself like they would.

Note that these methods are listed in order based on the likelihood of the deal closing.

Consider them as steps in your buying funnel and get reps in.

Reason #5: Vampires Exist After All

There are 3 main bloodsuckers in the real estate game: litigators, Uncle Sam, and bankers.

They are things everybody has to deal with, whether it’s in this business or any other. Don’t let these guys scare you into abandoning your dream, like I did. That’s a worse situation to be in than anything they could throw at you.

Here’s some quick tips for each of the 3 vampires.


Worried about being sued?

Set up an LLC and buy the houses in it. Then, set up a specific bank account for the LLC and use it only for investing. It’s really easy to do online, and you can sleep well at night (at least until you start flipping houses!)

Note - this is not an optimal (or even necessary) strategy, especially when starting out, but it’s a legitimate one if you are concerned about this particular vampire.

-Uncle Sam-

Keep your finances in order for Uncle Sam.

  • Find a CPA.
  • ​Collect and record all possible expenses on a project.
  • ​Maintain your books and research all the things you can legally write off.

Spend some time educating yourself on the basics of business taxes until you understand the high-level stuff.


This just is what it is.

You’re going to have to pay interest and points on these deals. Don’t get caught up in the drama of fluctuating interest rates. Let everyone else worry about that.

Find a deal that makes the current interest rates work, and then underwrite the deal accordingly.

Reason #6: Getting Ahead Requires Keeping Your Foot On The Gas​

No matter what else you face in the house flipping game, you can only get ahead while you have your foot on the gas of the business.

This was the hardest reality for me to accept, but also the most necessary for my growth. If I hadn’t initially given up, I may not have come to terms with the nature of this business. I needed to go through the hard work of addressing the reasons that brought me so much frustration in order to set myself up for something bigger.

For me, that thing is a portfolio that would provide for me and my family when I wanted to pump the brakes a bit.

Having Said All That, Is Flipping Houses Worth It?

Although my primary focus is acquiring rentals, I do still flip houses, and I think you should too.

House flips are an essential tool in moving you toward the ultimate goal of picking up as many rental properties as possible. In time, your rental portfolio will be the source of most (or all) of your cash flow and wealth will come from. Note, however, the key word here is “time.” It’s going to take time to acquire these properties, and you’ll need a tool along the way to help you do so.

This is where house flipping comes in.

Use this tool wisely and you’ll get to enjoy the following benefits:

  • ​You’ll be able to practice and hone your renovation skills. 
  • ​Profits from flips can be used to grow your cash reserves, allowing you to purchase more properties. 
  • ​Having a constant supply of projects helps you keep the best contractors working for you. 
  • ​With multiple projects going at once, you’ll be able to create Cost Efficiencies by giving a single contractor multiple projects. That keeps his crew working, which leads to lower expenses for you.

Flipping houses never gets easy, but it can get easier. Throughout the process, keep in mind the bigger purpose: growing your real estate holdings. That’s the gift that keeps on giving.

Good luck out there.

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Hi, I'm Ross Paller

CEO Of Larossa

After flipping over 300 houses, holding a portfolio of 150 properties, and creating a successful construction company for over a decade, I felt compelled to pay it forward by sharing the wealth of knowledge and experience I’ve accumulated on my journey.

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