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If you’re someone who cares about real estate, chances are that flipping houses has crossed your mind once or twice. Seeing a distressed property’s potential, executing a vision that maximizes its value, and turning a big profit is an exciting challenge that requires both business acumen and creativity to pull off. If you have a special interest in design, architecture, or historic buildings, it can be an especially seductive business model.
However, flipping is tough and leaves little room for error. It will test your ability to work against the clock, eliminate waste, know your buyer, and understand what adds value. No one develops those skills overnight, but luckily there are some common rookie mistakes you can steer clear of by following a few simple rules.
In this guide, we’ll walk you through five of the most common mistakes that first-time flippers make and give practical advice on how to avoid them based on our hard-won experience.
Mistake #1: Misjudging ARV (After-Repair Value)
Unfortunately, your most important number is also one of the easiest to get wrong. Many investors who are new to flipping misjudge ARV because they only look at part of the picture. Maybe they base their ARV estimate on recent sale prices in the neighborhood without considering differences like proximity to a busy highway or the property’s age compared to those around it. Maybe they fail to account for shifts in the market since the last nearby house sold. Whatever it is that’s thrown an investor off the mark, the consequences for misjudging ARV are the same: costly.
Why it kills deals: If ARV is wrong, every other number is wrong. It’s impossible to plan your scope, estimate your budget, or even decide if a flip is viable in the first place if you’re not working from a realistic ARV estimate.
How to avoid it: For an accurate ARV, make sure you’re basing your estimate on comprehensive comparisons.
Pull 3-5 true comps Look at properties within 0.5-1.0 mile that are similarly sized and have the same bed / bath number, are of a similar age, and have sold in the last 3-6 months max.
Look at the photos, not just prices Location, year-built, and square footage are important, but they’re not the only factors that go into a sale price. Carefully comb through listing photos of comparable properties and consider what effect the finishes might have on value. If the recently sold house across the street has marble countertops and solid oak floors while you’ve budgeted for granite and LVP, for instance, a house a few streets away might be a better comparison. Then visit the site to see if there are any white elephants like power lines, a steep driveway, or busy road nearby that could permanently reduce value.
ARV Photo Checklist
Here are the things you should keep an eye out for:
Kitchen: cabinet style, counters, appliances (stainless vs. white / black), vent hood
Baths: shower / bathtub, flooring, vanity (single vs. double)
Floors: flooring materials (LVP vs. hardwood vs. carpet)
Add-ons: garage, deck, finished basement, outbuildings
Use the MAO formula as a guardrail Once you’ve done your homework and come up with an ARV based on up-to-date, comprehensive comparisons, use the formula below to see if you might have a viable deal on your hands.
MAO (Max Allowable Offer) = (ARV × Target %) − Repairs − Selling/Fees
For many markets, target % ranges from 65-75% depending on risk and hold time.
Mistake #2: Underestimating Repairs and Scope Creep
The next big mistake is two-pronged but can be summed up more or less as a failure to understand what will add the most value. This can result in prioritizing non-essential line items that don’t sway buyers and eat up time and money needed for critical improvements.
The first thing rookies tend to do that jumbles their priorities is underestimate how much work a property will need and / or how much that work will cost. If someone doesn’t know what to look for, they can mistake a major issue for an easy fix. For instance, they might just think they need to rip out some water-damaged carpets when they actually need a whole new floor.
First-timers also frequently fall into the trap of renovating to their own taste instead of the buyer profile. Adding a personal touch can be part of the fun, but left unchecked this turns into scope creep which can sabotage budgets and alienate buyers. For example, a flipper might re-decorate an entire house with expensive colored paints and custom wallpaper that puts some buyers off when simple, neutral tones would cost far less and have broader appeal.
Why it kills deals: Every line item comes straight out of profit. If you don’t go into a flip with a realistic picture of your non-negotiable repairs and adhere to a strict plan that maximizes value, costs can get out of hand very quickly.
How to avoid it: Walk through the property with an expert who can help you spot big-ticket repairs before you close. When you offer, write in a brief inspection period so that you can verify bids and get a formal evaluation if needed. Once you’ve got an idea of essential repairs, budget only for renovations that add real value.
Scope discipline
How do you prevent scope creep from eating up your profits? Keep the following in mind:
Renovate to buyer profile You’re selling the property, not moving into it. Keep decor neutral and broadly appealing. A clean, modern, functional space that buyers can envision putting their own stamp on is the goal.
Use factory-built finishes You’ll save time and money using cabinets, flooring, and appliances that are already fabricated and in stock. There are situations where items have to be special ordered or custom-made, but avoid them where you can.
Add 10-15% contingency to your rehab line Set a decent chunk of your budget aside to handle the inevitable surprises (more on this in #5).
Mistake #3: Skipping Major Systems and Missing Hidden Risks
A pretty house might get an offer, but if major systems need work or there are hidden risks that offer can get withdrawn fast. We’re talking about the kinds of issues that, at best, will cost thousands to fix in a few years and at worst can cause extensive property damage and / or threaten the health and safety of occupants. When things appear to be in good working order, first-time flippers often fail to look for red flags that would alert a seasoned pro to potential trouble and only find out about them later when they can’t sell the house.
Why it kills deals: The point of flipping is to sell a property in turnkey condition at its highest market value. Properties that have plumbing older than their grandpa or HVACs that were installed during the Clinton administration are not what buyers want to deal with when they’re paying top dollar.
How to avoid it: Be proactive and don’t assume something isn’t an issue just because it hasn’t been an issue yet. Always check the following before making an offer:
Foundation Foundation issues lead to all kinds of other issues. Look for stair-step cracks, bowing walls, and signs of water intrusion.
Roof & HVAC ages Even if they’re well-cared for and in good shape, old roofs and ventilation systems can put buyers off. Verify ages via serial numbers / manufacture dates. Less than five years old is fine, between five and ten years might be ok, older than ten years should be replaced.
Plumbing Old plumbing can be really problematic. Galvanized supply lines can cause water contamination. Cast iron drains are prone to corrosion and expensive to replace. Inspect the pipes, especially if the house was built before the 1980's.
Insulation You’d be shocked at how often it’s missing. Pop the attic hatch to make sure heating the house isn’t the equivalent of throwing money into an incinerator.
Flood zone Verify on FEMA maps whether the property sits in a flood zone. Mortgage lenders will often require flood insurance for homes inside of flood zones which can crush buyer demand.
Septic vs. sewer Find out the tank location, permit history, and last pump date. Most septic tanks need to be emptied at least every 3-5 years.
If you uncover a big-ticket unknown, bring in a specialist during the inspection window who can tell you definitively what the issue is and how much it will cost to fix. Then use verified bids to renegotiate. If you can’t renegotiate to the number you need, walk away.
Mistake #4: Paying Contractors the Wrong Way
A lot of people who are new to flipping don’t have much experience hiring contractors and don’t understand how to do business with them. They might get lucky and hire a solid crew, but if they pay for work that winds up being shoddy or incomplete, they usually eat the cost and are left scrambling to find someone who can clean up the mess.
Why it kills deals: You achieve maximum ROI by adhering to a strict budget and timeline. Poor workmanship is a threat to both. If you pay too much before work starts, you forfeit your best leverage to ensure that things are done properly the first time and risk never getting your money back if the work isn’t good. The more time and money you lose, the less you profit.
How to avoid it: Do not pay for work that isn’t completed to standard. If the contractor you were going to hire walks away because of that policy, good riddance. Good contractors might ask for small deposits but demanding big money up front is scammy behavior and a big red flag. Any decent crew expects to be paid for progress, not promises.
Simple draw schedule template
Here’s an example timeline showing incremental draws from a renovation budget based on completed work.
Week 1 — Demo + rough framing started → X%
Week 2 — Rough MEPs (mechanical, electrical, plumbing) complete → X%
Week 3 — Insulation + drywall hung / finished → X%
Week 4 — Cabinets / trim / paint → X%
Week 5 — Flooring, fixtures, punchlist → Balance
Tips
Pay for materials directly at the counter when possible.
Photograph milestones before releasing draws.
Always keep retainage (e.g., 10%) until final walkthrough + punch.
Red flags
Don’t hire a contractor if:
They “need 50% to start.”
There’s no line-item bid, they’re vague about scope, or don’t have any references.
Are unwilling to sign a simple scope + payment agreement.
Mistake #5: Forgetting Contingencies
Even if you’ve done your homework before closing, you can still find termite damage or rotten subfloor once you start ripping out paneling and pulling up carpets. Markets can turn and properties that would have sold in a week six months ago might end up sitting around a lot longer. Flippers learn early on to expect the unexpected, but many first-timers learn that lesson the hard way when they forget to add contingencies to their calculations.
Why it kills deals: You can’t predict your rehab costs down to the penny but you need your budget to be as accurate as possible from the outset to determine if a flip is worthwhile. The same goes for your timeline. If you don’t have money for unknowns already set aside and time for delays factored into your calculations, unknowns you hadn’t bargained for will murder your profit margin.
How to avoid it: When you’re doing the pre-offer math, give yourself a healthy amount of wiggle room in the following three areas:
Rehab contingency: +10-15% of labor and materials
Timeline buffer: add 2-4 weeks beyond best case
Holding cost buffer: underwrite 6 months of carry even if you expect 3
Once you’ve figured out contingencies, you can accurately calculate your all-in:
Purchase + Rehab + Carrying (interest, utilities, taxes, insurance) + Selling (agent commissions, concessions, title, transfer) + Contingency = Reality
Bottom line: thin spreads leave no room for a hiccup. If the deal only works with perfect execution, it’s not a deal.
The Psychology Traps That Blow Budgets
Rookie mistakes are usually pretty simple to avoid, but simple doesn’t always mean easy. When you’re new to flipping and excited to do your first deal it can be a lot easier to get swept up by optimism than to maintain a healthy sense of pessimism. Here are some common psychological traps that a lot of rookies (and experienced flippers too) fall into:
Auction fever: Have you ever promised you wouldn’t bid more than, say, $200 for something at an auction only to get outbid by $10 and then asked yourself “what’s another $20?” over and over until you found yourself bidding $400? A win isn’t actually a win if it costs way more than you can afford. Stick to the plan.
Comp cherry-picking: It’s tempting to get excited when a house nearby sells for big money, but you need to base your ARV on a comprehensive picture of the market instead of one shiny sale. If one house on the street sold for $500K three months ago but every other house before and since has sold for $200K-$300K, your ARV is a quarter mil, not half.
Sunk cost fallacy: So many flippers wind up in the trap of throwing good money after bad because they’re “already in it.” If you’re at the point where you can’t salvage the deal (or are heading in that direction), it’s time to cut your losses and find a new exit strategy. Sometimes flips flop. The best thing you can do in that case is not dig yourself an even deeper hole.
Speed blindness: To be fair, it is genuinely hard to strike the balance between speed and due diligence. Sometimes competitors swoop in and snatch up a deal before you and it sucks. Just remember that missed opportunities only cost theoretical money. Rushing due diligence to beat competitors and then finding out the property is riddled with structural issues you can’t afford to fix costs actual money. It’s better to err on the side of caution.
An important lesson you learn in flipping and in life is that the one that got away was never really for you. Just like how someone who doesn’t return your feelings isn’t your soulmate, a house that can’t work with your budget or that you have to buy sight-unseen isn’t a deal. It’s hard sometimes to be patient and walk away when it’s not right but just remember that real matches come around and are worth the wait.
A Simple First-Flip Workflow
Here’s an illustration of your basic flip timeline to get you started:
Day 0–3: Deal screen
Pull comps + photos, drive the street, apply MAO guardrail
Phone scope with contractor to sanity-check repairs
Day 3–10: Lock + verify
Sign contract with inspection window
Contractor & specialist walk → line-item bid + contingency
Title opens; insurance & utilities planned
Day 10–45: Rehab
Weekly milestones + photo check-ins
Materials ordered early to avoid delays
Change orders documented
Day 30–75: List & sell
Price to move within 30 days; get professional photos; clean yard / put up signage
Close & debrief
Save photos, net sheet, and lesson log → your next flip gets better (and cheaper).
FAQ
What’s a “good” flip margin for beginners?
Aim for 10-15% of ARV after everything, not just purchase minus rehab. In riskier submarkets, push higher.
General contractor vs. self-managed subs—what’s smarter early on?
If you’re new, use a reliable GC. You’ll pay more but avoid costly sequencing mistakes. Graduate to managing subs after you’ve shipped a few clean rehabs.
Can I leave an older but working HVAC / roof?
In today’s market, buyers and lenders lean conservative. If the unit or roof is >10-15 years (market-dependent), plan to replace or price accordingly.
How do I avoid overpaying when it’s competitive?
Write your MAO on paper before the appointment. If the seller’s number forces you above it, walk. Waiting for another lead is cheaper than a bad flip.
The Bottom Line
Flipping isn’t easy money, but the components of a successful deal are simple; accurate ARV, realistic repair budget, disciplined scope, and clean execution. You may be excited to leap into a big challenge, but flipping works best when your feet are on the ground. Keep a conservative attitude when you’re pulling comps and crunching numbers and never be afraid to walk away if something isn’t right.
