Flipping houses can be incredibly rewarding, but it’s also full of potential pitfalls. I’m Tony Javier, and with over 1,000 flips under my belt, I’ve seen it all. In this video, I break down the top 7 house-flipping mistakes that cost investors millions and how you can avoid them. From choosing the right area to managing contractors and budgeting smartly, I’ll share insider tips that will save you time, money, and headaches. Watch now and learn the secrets to successful real estate investing!

===================================================

Welcome to the Real Estate Masters podcast, where we interview the top names in the Real Estate game. If you want to grow your Real Estate business, see more podcasts, or get free resources – Go to www.REMmastermind.com. The only podcast that allows you to directly connect with the guests and many of the highest-level names in the real estate game.

You are in for a treat with our next guest. Do me a favor, subscribe to the podcast, leave us a review, and don’t forget to go to www.REMmastermind.com to connect with some of the highest level Real Estate professionals in the United States through our community and through our high-level masterminds. Let’s go.

Apple Podcasts – https://tonyjavier.com/applepodcasts

===================================================

Show Transcription:

Tony Javier (00:00):

Want to flip houses and avoid the mistakes that cost me millions. I’m going to share the top seven mistakes investors make. While number five is probably the most common mistake, number seven has cost me millions of dollars, and I don’t want you to make the same mistakes I have. I am Tony Javier own Urban Inc. 5,000 real estate investment company, and I’ve successfully flipped over 1000 houses, totaling over a hundred million dollars, and I’m sharing seven mistakes that can cost you a fortune so you don’t have to make them. Let’s get into it. So number one, choosing the wrong area. Lots of newbies obsess over finding the hottest areas to flip in, but that’s the wrong way to look at it. The truth is, there are good streets and bad streets in every city in town. The key is looking for proven comparable sales on that specific street or in that area.

Tony Javier (00:51):

If no houses have sold for 20 years run. But if houses have consistently sold for the dollar amount that you’re looking for and you can buy yours for way less, you may have a winner. Don’t get too caught up in things like school districts or public transit. The comps are probably already factored into these. The only thing that matters are recent comparable sales in that area. For a house that is very similar, stake number two, not doing your due diligence, the most common mistake is looking at the best comparable sales and using that as your sales price. Some houses in the area may have sold for $200,000, but what if yours only appraises for 150, which could be the lowest recent sale in the area? Don’t just hope for the best. You have to plan for the worst at the same time. That’s not meaning you want the worst to happen, but you have to plan for it.

Tony Javier (01:42):

Always use conservative estimates and use worst case scenarios. If you’re okay with the worst case scenario, then it’s probably a good deal. That way you don’t get burned if your flip ends up selling for less. My team is unbelievable at this. They will send me a deal and they’ll project $15,000 and typically we’ll make at least 25 to $30,000 on that same deal, and that’s because they’re valuing the property a little less than we really think we can get for it. We’re estimating the renovations a little bit more than we think, and we’re building in something that we’re gonna talk about later that you have to plan for. Stake number three over renovating the property. Here’s where inexperienced flippers go. Way overboard and waste money. Remember, this is not HGTV, especially if you’re in a really hot market like we are right now. As I’m filming this, a lot of people spend way too much money on flashy upgrades that don’t actually increase the value of the home.

Tony Javier (02:39):

Don’t think what you would want in it. Think what the average person would want in a house. The golden rule is only make renovations that are similar to your comparable sales. So if all of your comparable properties show a lot of great updates, you may wanna upgrade your property to that standard. If a lot of your properties are outdated, that means you don’t have to do nearly as many renovations stick to the essentials that people want, which is fresh paint, new flooring, and updated kitchens and bathrooms. Any work beyond that may just be a diminishing return and unnecessary to do so. Not only do you want to look at your comparable sales, but you also may want to talk to your contractors on what they are seeing out there. Speaking of contractors, mistake number four, using bad contractors. This one’s pretty self-explanatory, but it’s crucial not to use unlicensed contractors.

Tony Javier (03:29):

In shady contractors. Their poor workmanship will come back to bite you. Not to mention if you have to fire them, you’ve gotta start all over. Don’t always use the cheapest contractor and don’t use the one that’s available tomorrow. Chances are there’s a reason they’re not available tomorrow. Always vet contractors and you can do that by looking at the reviews, checking their references and seeing their previous work that they’ve done, and of course, checking if they’re insured and licensed. It’s worth investing in quality contractors even if you have to pay a little bit more because shoddy workmanship that needs to be redone will take away from your profits and keep your homes from selling. Number five, no written renovation plan. You know what they say? Failing to plan is planning to fail. You need a detailed written plan outlining step by step the schedule, what renovations are gonna be done by which contractors and what materials you’re gonna use.

Tony Javier (04:25):

I always have my contractors line item, every single line, labor and materials, so that way if we ever take anything out, we can just take it out. As opposed to going back and saying, well, you bid, you know, $30,000 for all these things. How much was this? We don’t want to do this. By doing that later is going to take a lot of time and energy and not to mention it’s going to create a lot of confusion. You also have to have deadlines for every subcontractor and accountability plan with penalties and what’s gonna happen if they’re delayed and have overages and who’s gonna take care of that? A good contractor can make or break your project. Trust me, the projects that have gone really well have had really good contractors and the ones that have gone bad are usually the ones that have bad contractors.

Tony Javier (05:12):

Number six, buying at the wrong price or buying at market value. You never want to buy at market value, especially if you’re looking to fix and flip that property and make a quick profit. You know, they say that you make your money when you buy, which I don’t completely agree with because just ’cause you buy it right doesn’t mean you’re gonna make money. But the way you buy the property is most likely gonna predict how much you’re gonna make on it on the back end if you execute correctly. So the more of a discount you can buy, the more cushion you have to make mistakes and the more profit you’re probably gonna make. So don’t increase your numbers and buy it at a risky price just for the sake of doing the deal. Every time that I’ve done that, which hasn’t been for a long time, but any times I have done that, it’s bit me in the butt where I said, you know what?

Tony Javier (05:57):

I wanna buy this for 150, but they want 170. Alright, I’ll give it to ’em and I’ll figure out how to save on renovations. I’ll figure out how to increase the price. And guess what typically never works. So buy at the right price and make sure you run your numbers right. Number seven, no contingency budget. Even the most experienced flippers get surprised by unexpected costs from time to time. That’s why you must bake in a contingency reserve budget from day one. For us, we take the projected renovation cost and times it times 10%. So if a budget is $70,000, we put an extra $7,000 in overages just as a safety net, and if we don’t use it, that’s just extra profit. And a lot of mistakes other investors don’t make is not preparing for utilities, insurance interest and all those other things in the project, but especially if it runs over.

Tony Javier (06:50):

Not budgeting for these inevitable surprises is going to cause so many fix and flippers to go broke. Just do yourself a favor and protect yourself at the beginning by baking in a contingency plan. And I’m gonna give you a bonus mistake here. Getting emotionally attached to the property is a fatal sin. Don’t get so invested in the property that you do a deal that you normally wouldn’t have done if you weren’t so emotionally invested. When you get emotional, you stop thinking rationally about numbers and start viewing it as a passion project. You risk overpay, you risk over renovating and you risk just way too many things when you get too sentimental and too emotionally invested in a property. Successful flipping is a numbers game, pure and simple. That’s it. You need to look at properties with a cold, analytical eye. Don’t let your emotions get involved in making bad decisions.

Tony Javier (07:43):

So there you have it. The seven biggest mistakes that I think an investors can make that can derail your real estate investing career. So just to recap, keep these in mind on your next project. Research neighborhood comparables thoroughly. Always be conservative with due diligence, never over renovate a property. Make sure you vet and hire qualified contractors. Get detailed renovation plans in writing. Always buy well below market value. Bake in a contingency plan, and remember to detach yourself emotionally from the project. Avoid these pitfalls and you’ll be well on your way to making serious profits from fix and flip properties. If you like this video, check out one of my latest flips or the top five ways that you can invest in real estate. I just recorded those recently. Go check ’em out.