Why Most Flippers Crash and Burn

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Most new house flippers fail within 12 months because they approach flipping as a hobby instead of a business. This episode provides the blueprint for survival with 10 critical mistake patterns and their solutions to help you build a sustainable house flipping operation.

• Mistake #1: No consistent deal flow - commit to three acquisition channels with weekly targets
• Mistake #2: Buying bad deals - use the Safe Offer Cap formula (ARV minus fixed costs, rehab costs, and profit)
• Mistake #3: Underestimating rehab costs - create detailed scope with line-item estimates plus 10-15% contingency
• Mistake #4: Contractor chaos - require licenses, insurance, written scopes, milestone payments, and regular site visits
• Mistake #5: Overspending on finishes - match neighborhood comps, not personal taste
• Mistake #6: Ignoring permits and code - map required inspections before demo and budget the time
• Mistake #7: Running out of cash - conservative ARV, full funding before closing, respect your Safe Offer Cap
• Mistake #8: Death by the last 10% - run punch lists and pre-inspection walkthroughs
• Mistake #9: Weak project management - clear work orders with deadlines and milestone-based payments
• Mistake #10: Botching the exit - ensure property is clean, safe, fully functional before listing

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Episode Transcript

Speaker 1 (00:00):
Most new flippers fail in the first 12 months
because they treat flipping likea hobby.
You're going to treat it like abusiness.
That's how you last Ever sat inyour car, scrolling through
Zillow and thought, man, if Ijust knew where to start, I
could flip one of these.
Yeah, I've been there too.
Most people who want to fliphouses never even start, not

(00:20):
because they're lazy, butbecause they don't have the
blueprint.
Well, that changes today.
If you give me five minutes,I'll give you real-world
flipping strategies thatactually work.
No fluff, no theories, nogatekeeping, just real how-to
information for you to apply.
Today, most new flippers flameout in a year.
It isn't bad luck.

(00:41):
It's the same avoidablemistakes on repeat.
Today, we're going to talkabout 10 mistake patterns and
the simple fixes that'll keepyou out of the scrap heap.
Welcome to Demo, to Dollars,your no-BS flipping playbook.
One tip at a time.
If you want to flip your firsthouse and actually keep the
profit, this is the episode foryou.
Here's the pattern A newbiebuys a razor-thin deal,

(01:04):
underestimates the rehab, hiresthe wrong crew, bleeds cash
while the last 10% drags on,then gets crushed at inspection
or appraisal.
That's not fate, that's badplanning and it's fixable.
So let's fix it.
Mistake number one noconsistent deal flow.
You can't win if you never seegood inventory.
Most beginners rely on onechannel.

(01:26):
Then wait.
Waiting is not a pipeline.
Commit to three channels youcan execute every week Direct
mail, real estate agentwholesaler relationships and one
outbound channel like texts ordoor knocking.
Track touches, appointments,offers and contracts.
Offers shipped, not excuses.
So the fix set weekly targets,review the numbers every Friday,

(01:50):
adjust what's weak.
Mistake two buying a bad deal.
Most mistakes start atacquisition.
Arv is inflated, fixed costsare ignored, rehab is just a
guess.
Use the demo to dollar safeoffer cap to keep yourself out
of trouble.
What's that here?
It is Safe offer cap equalsafter rehab value minus your

(02:13):
fixed costs, minus your rehabcosts, minus your profits.
It's a little different thanMAO maximum allowable offer, but
it's a lot safer, especiallyfor beginners.
So for newbies, set fixed costsat about 10 to 12% of ARV,
usually right in that range, andthen use a profit floor of
greater than 15% or $25,000,whichever is more.

(02:38):
So here's the fix Run the SOCon every property.
If the seller's price is aboveyour cap, adjust the plan or
walk away.
Mistake three underestimatingrehab.
This one's a big one Winging.
It isn't a budget.
You need a detailed scope and aline item.
Estimate Price, every task,every detail, and then add a

(03:00):
contingency of no less than 10%.
If you're new at this, Irecommend 15%.
The fix.
Use breakdown estimation roomby room, add at least 10% and
preferably 15% contingency.
Do not make an offer untilyou've figured out scope.
Mistake four contractor chaos.
We just talked about this inthe last episode.

(03:21):
But wrong hires, fuzzyexpectations, no paperwork and
no site presence.
That's how projects drift andbudgets explode.
Require licenses and insurance,non-negotiable Use, written
scopes of work and work orders.
Pay by the milestone, not bythe vibes.
This is not the time to be agood guy.

(03:42):
Collect a lien waiver withevery payment.
The fix.
A pre-construction meeting onday one, expectations in writing
, site visits at least weekly,and it's always a good idea to
surprise them every once in awhile.
Mistake five this is the one Imade with my first New flippers.
Love fancy.
Buyers pay for right.

(04:03):
Your finishes must match thecomp set, not your Pinterest
board.
The fix.
Standardize on finishes byprice point and neighborhood.
Save the artisanal tile foryour forever home.
Mistake six ignoring permits andcode.
Skipping permits triggersdelays, rework and red flags for

(04:24):
buyers and appraisers.
The fix map requiredinspections before the demo
Sequence trades around them.
Budget the time.
Mistake seven running out ofcash.
It's a classic one Holdingcosts, points, interest, they
all chew through thin margins.
One surprise and you are toast.
The fix.

(04:44):
Underwrite with conservativeARV Fund the full budget plus
contingency before you close,plus a little extra.
The SOC protects your runway,respect it.
Mistake eight death by the last10%.
Almost done will last forever.
Done means there is nothingleft to do.

(05:06):
The final 10% is whereschedules slip.
The fix Run a punch list.
Pass then a final walkthrough 24hours before the buyer's
inspection.
Fix issues before someone elsewrites them up.
Mistake nine weak projectmanagement.
If everyone owns it, nobodyowns it.
The fix Every contractor gets awork order with scope, start

(05:29):
date, milestones and deadline.
Weekly updates cover completedtasks.
There is nothing left to do.
Roadblocks, next steps andimmediate needs and you pay on
those milestones anddeliverables.
Mistake 10, botching the exit.
I've seen this so many times.
You reach the finish line, thenlost the race at inspection or

(05:50):
appraisal.
Fix clean, safe, fullyfunctioning cells.
Run your final checklist stagethe property and price two of
the comps you used to underwritethe deal, your 12-month
survival plan.
Here's the plan that keeps youalive.
Long enough to get good at thisPipeline Three channels, weekly
targets.

(06:10):
To get good at this Pipelinethree channels, weekly targets.
Visible scorecard underwriting.
Use the demo to dollar safeoffer cap with a profit floor of
at least 10, preferably 15% ofARV or $25,000, whichever is
more.
Scope and budget line item SOWbreakdown estimations.
Real contingencies no less than10%.

(06:30):
If this is your first, make it15.
Contractors you've got to gettheir licenses and insurance.
You need to verify that.
Written work orders, milestonedraws, lien waivers with every
payment and job site presence.
Match the level of your finish,match the comp set, not your

(06:51):
taste.
You will never live there.
Permits and inspections Knowthe path.
Work the plan Simple.
Close out, run your punch list,pre-inspection walkthrough and
then final clean and make it adeep clean.
Look, most new flippers fail inthe first 12 months because
they treat flipping like a hobby.
You're going to treat it like abusiness.

(07:12):
That's how you last.
That's how you scale.
Thank you for making us a partof your day.
If this helped, follow the show, share it with a friend and go
make an offer today.
This is Demo to Dollars.
See you next time.
Thanks for listening to Demo toDollars.
If today's episode helped youmove one step closer to your

(07:32):
first or next deal, do me afavor Follow us wherever you get
your podcasts so you never missa show.
I'm grateful to be part of yourjourney.
Now get out there and getcracking Bye for now,