What I Wish I Knew Before My First House Flip

TLDR
If I started over, deals one through three would be direct mail to sellers, a tight LLC, and one deal at a time. Deals four through eight would be BRRRRs and minimizing renovation scope. Deals eight through fifteen would be narrow focus on one property type, one neighborhood class, repeated until boring. Boring is systematizing.

Table of Contents

Deals 1 Through 3: Just Start

When I was younger, I had a corporate job. I bought rental property, put renters in to cover the mortgage. I knew there was something more. Then one day in Omaha, I pulled up to a Subway for lunch and an old Cadillac parked next to me. Guess who hopped out? Warren Buffett. He lives there. And I thought, he didn’t get where he was working somebody else’s P&L.

The next day I started to plan. I didn’t plan very long. I found the first flip I could buy. Bought it. Learned a lot of lessons the hard way.

Here’s what I’d do differently if I started over.

Set Up the LLC in the Parking Lot

People get freaked out on this step. You hear about how you need an LLC registered in a specific state, a CPA, an attorney, blah blah blah. analysis paralysis sets in.

I’ve set up so many companies in the parking lot of Wells Fargo. It doesn’t take much. Remember, the whole point of those structures is to protect assets. You don’t have any assets yet. Get started.

Simple LLC. Checking account in that name. Move on.

Focus on Getting One Deal

There are a lot of ways to find a deal. I’d focus on one: direct to a potential seller. Here’s the exact process.

  1. Pull a list. There are list companies online. You can filter to house size, bedroom count, owner-occupied or not, other properties owned, tax value, market value, loan balance. Pick the most popular list filter to start. It’s popular because it works.

  2. Send mail. Use a direct mail service. I’ve used Yellow Letter HQ in the past. Give them your list. Use copy that already works (don’t get cute on your first mailer). Something like “Hi, I’m an investor and I want to buy your house in cash.”

  3. Set up a phone number and landing page. Use a VoIP so people don’t call your personal cell. Set up a basic home base so people know you’re legit. Helps if you’re local. Builds trust.

  4. Work the response. A thousand pieces of mail usually returns one percent, so ten calls. Those turn into about three appointments. Those turn into one contract. About sixty to seventy percent close.

The Walkthrough and the Money

Once you have a deal under contract, you go find the money. I know it feels backwards. In this game, you present a lender with a deal, not the other way around.

At the walkthrough, build the most detailed scope of work you can. Write every line. Take photos. Take a video. You might not get back into that property before closing.

Then go to a hard money lender. Banks won’t lend on a house that isn’t livable today. Most off-market deals aren’t livable. You need a lender who will cover acquisition plus rehab.

Once you have a commitment, take your scope to contractors. At this point you probably can’t get them inside the house, so you’ll get soft bids. That’s a ballpark estimate they’ll firm up once you close.

After closing, firm up the bids, hire, and do basic project management. Good old fashioned.

First-Deal Rules

  • Keep your personal finances tight. Don’t add pressure elsewhere while you’re learning.
  • Don’t look for deal two until deal one is sold or refinanced. Extra risk is the enemy.
  • Expect twelve to eighteen months. Be okay with that.

The Mistake That Changed Everything

I finished that first flip. The one I left my job for. Made some money. I thought it was my skill. In hindsight, it was the market rising.

Next flip, bigger project. Then a bigger one. Then a bigger one. Until the market stopped working in my favor. I lost it all. Every dollar I’d made on the flips, I lost on one deal.

But remember those rentals I bought during my corporate job? They’d quietly appreciated the whole time I was flipping. I was sitting on a nest egg I didn’t know I had.

That’s the real lesson. House flipping is a great vehicle for cash and experience. The real wealth is in rental property.

Key Concept
Your personal residence is probably the biggest chunk of wealth you’ll build in your lifetime. A three-hundred-thousand house bought today, held thirty years, appreciates at a conservative three percent a year. It’s worth around seven-hundred-twenty-eight thousand when paid off. Now imagine doing that with a whole portfolio of houses where the tenants make the mortgage payment for you. That’s the game.

Your mortgage is fifteen hundred a month. The tenant pays you two thousand. They’re covering your mortgage and building your wealth. It’s free real estate. Banks will even lend you money to do it. That leverage is why real estate builds more wealth than almost anything else.

Deals 4 Through 8: The BRRRR Shift

At this stage I’d focus on gaining my first rental using BRRRR. Buy, renovate, rent, refinance. Instead of selling to a buyer, you’re selling to a bank. A mortgage on the property pays off the hard money loan. You keep the house as a rental.

New Vendors I’d Need

Two people I didn’t need before:

I’d also be thinking hard about systematizing. Especially deal flow. No more waiting for one deal to sell before starting the next. I’d start looking for deal seven the minute I put deal six on the market.

Adding Marketing Channels

At this stage, I’d add:

  • Cold calling or a cold calling service
  • Digital marketing (Facebook, Google ads)
  • Maybe a social media campaign

If I found deals I wasn’t going to buy myself, I’d start building a buyer’s list so I could flip the contract to other investors. If I got really good at finding deals, I’d do wholetails. That’s where you take an off-market deal, don’t rehab it, put it right back on the MLS. You catch the retail premium without owning the rehab.

The Real Point: Better Deals Shrink Renovations

Here’s what I wish someone had told me: before you know how to find a great deal, the only way to create a great deal is massive renovation on a house nobody else wanted. That’s a fine strategy. Not a strategy that scales.

Better deals on the front end means less renovation on the back end. Build your deal-finding skill alongside your subcontractor bench. Focus hardest on the deal.

The Holy Grail Side Move

There’s a pro-tip category here. Seller-financed or subject to deals. The “holy grail” of real estate because you often don’t put any of your own cash on the table.

Seller financing. Seller owns the house outright. Instead of a bank, the seller holds the note. You pay them monthly.

Subject to. More complex but essentially you take over payments on the mortgage that’s already in place. Mortgage stays in the seller’s name. You own the property.

In a lot of cases, no cash out of pocket. These don’t count against your deal count because they’re freebies.

Deals 8 Through 15: Boring Wins

After adopting BRRRR and subject-to, I was able to take it to the next level. I no longer had to spend five hundred fifty days straight on one renovation. I had processes I could repeat. That opened doors: partners, private equity in funds, syndications. I could go from one house a year to one a month, then one a week.

I learned it’s all about going an inch wide and a mile deep. Not a mile wide and an inch deep.

Pick Your Lane

If I did deals eight through fifteen over, I’d know exactly what type of deal and where.

For me: B or C class properties, under fifteen hundred square feet, zero to sixty thousand in renovation work. Anything bigger required more problem-solving, which requires all my bandwidth. Bandwidth is the one thing I’m really trying to preserve.

Every deal should look like the last one. If someone said “all your flip photos look the same,” that’s a compliment. Boring is systematizing.

Pro Tip
The way to win Monopoly isn’t to buy one blue, one red, and one green. You buy a purple, then all the purples, then put as many houses as you can on them. Then you move to yellows. Same block, same property type, repeated. Rainbow portfolios don’t win.

The Focus Trap I’d Avoid

My problem was I kept wanting to make a rainbow. Different neighborhoods, different property types, different strategies. It ended with me writing checks I couldn’t cash. Once I had fifteen properties on a tight system, then I could pull my head up and consider new directions. Not before.

FAQ

I’m on deal one. Should I really avoid looking for deal two?

Yes. On deal one, you’re still finding out how every step works. Hard money. Contractor management. City inspections. Selling. Adding a second deal introduces risk and distraction. Finish one cleanly. Take notes on what went wrong. Apply those lessons to deal two.

What if my first deal loses money?

Happens more than people admit. Take the loss, close out cleanly, document what went wrong (was it the ARV, the rehab scope, the contractor?), and do the next one. Every failed first deal I’ve seen the investor bounce back from turned into tuition that paid off on deals two through five.

How long should I expect deals one through three to take?

Twelve to eighteen months total. Slower than you want. That’s fine. Your goal isn’t speed on the first three. It’s skill.

Should I skip flipping and go straight to BRRRR?

You can. But a pure BRRRR strategy needs deals sharp enough that you refinance to recover all your cash. Those are harder to find than flip deals. Most investors start with flips, build cash and skill, then move to BRRRR. That progression works.

I’m brand new. Do I really need a scope of work on deal one?

Yes. A written scope of work is the single document that saves you the most money on your first deal. It sets contractor expectations. It makes change orders obvious. It keeps your rehab budget honest. Don’t skip it.