Most house flippers lose money because they overpay at purchase and ignore worst-case scenarios. All profit is made when you buy, not when you sell. Model both best and worst cases before you commit, or a downturn will wipe out your margin.
Why do so many people lose money in flipping real estate? Let's talk about that. There's two factors that you must understand: things I can control, things I can't control. What are things I can control? Purchasing price, valuation. When you buy real estate, all money is made, all profits are made on the day you buy it. It's not when you sell it. That is just validating what you did when you bought it. What are the things I can't control? Tariffs, inflation, COVID, cost of materials going up, demand in the neighborhood's dying. Once we understand what we can control, what we can't control, and we can underwrite it accordingly, we can really evaluate and make sure the margin is there. You must be able to look at not what is the absolute best I'm going to do, what's the absolute worst I'm going to do. Real estate demand goes down, valuations go down, and people don't look at that and they're like, oh crap, now the property is only worth $290,000, $300,000. I lose $10,000, $15,000, $20,000. That's people lose money in buying and flipping real estate.
