Top 7 Reasons Why Flipping Houses is a Bad Idea

Updated On:  May 28th, 2021

As a full-time house flipper, it might seem strange that I’m writing an article about why flipping houses is a bad idea. 

However, being a full-time house flipper gives me direct and first-hand knowledge of not only the pros but also the cons of flipping houses. 

And while I love flipping houses, the fact of the matter is there are a lot of negatives to house flipping and it’s not a good fit for everyone.   

Because while there are many positives to flipping houses such as the potential to make a quick profit, being your own boss, and a flexible schedule there are also many negatives to flipping houses. 

Why Flipping Houses is a Bad Idea

Let’s take a closer look at the top 7 reasons why flipping houses is a bad idea to help you decide whether flipping houses is a good fit for you or not.  

Potential to Lose Money When Flipping Houses

While we all have heard stories about the guy that made a fortune flipping houses or have seen the TV shows that tout spectacular profits from house flipping. 

The fact of the matter is, flipping houses is a form of real estate investing and just like any other type of investment, there is a very real possibility that you can lose money as opposed to making it.

While there are many things you can do to minimize your chance for loss on a house flip such as knowing and understanding your real estate market, buying the house right, having a workable plan, and using a detailed budget even with all of these tools in your house flipping toolbox the potential is always there to lose money on a flip.

So if you have an aversion to risk or speculation house flipping may not be a good fit for you.

Large Amounts of Capital Needed to Flip Houses

House flipping is very expensive not only due to the money needed to purchase the home but also because of the money needed to rehab and hold onto the property.

So unless you or your house flipping partner has deep pockets the sheer amount of money needed to flip a house can keep you on the sidelines.

While it’s true there are potential house flipping loans out there such as hard money loans and private money loans, it’s not always easy to obtain these short-term real estate loans and they can have very high-interest rates.

In fact, I’ve actually heard of some hard money lenders loaning money at an interest rate as high as 15%, not to mention the upfront points that can be charged at the start of the loan.  

Flipping Houses Can Consume All Your Time

It can be hard to explain to someone who has never flipped a house before, just how demanding flipping houses can be on your time. 

Because while it’s true that flipping houses lets you be your own boss and offers some short-term flexibility in your schedule, when you are flipping a house it tends to consume all of your waking moments.

It really is amazing how even the simplest of tasks that you budget an hour or two for can end up taking all day, especially when it comes to rehabbing the property. 

In fact, there is even a running joke around the worksite of our flips that however long you think a task will take you better double it.  

So if you are someone with very little time on your hands and you cannot devote a substantial amount of time to a house flip then flipping houses might not be a good avenue for you. 

Stress and Anxiety When Flipping Houses

Even with the most well-laid plans and detailed budgets often times things don’t go as planned when flipping houses and unexpected surprises are almost never good.  Such as finding out the house your working on needs to be completely rewired to bring it up to code.  

House flipping is a lot like a roller coaster with a lot of highs and lows.  While it can feel great to reach the finish line and receive a big paycheck, there are usually a lot of lows and high-stress situations along the way.

So if you are someone that doesn’t handle high-stress environments or bad news well house flipping might not be the best choice for you.  

Time and Opportunity Cost of Flipping Houses

Watching house-flipping TV shows can give you a distorted sense of reality when it comes to the amount of time it really takes to flip a house.  As house flipping shows tend to not paint a true or clear picture of the amount of time it actually takes to flip a home.

Speaking as a house flipper myself the fastest I have ever flipped a home from the purchase to the sale was 3 months and on average it usually takes us closer to 6 months to complete a flip. 

Because of the amount of time, it takes to flip a house you need to consider the opportunity cost associated with house flipping not only in relation to the amount of money being tied up but also the amount of time that must be invested. 

Knowing that a house flip can take half a year or more to complete, is there something else you could be doing with your money or your time that would yield better results?

Lots of Physical and Manual Labor

Flipping houses usually means a lot of long hard days filled with manual and physical labor. 

While it’s true you can farm some of the work out to subcontractors a lot of the manual labor usually falls onto the house flipper because of the lack of qualified workers and the high cost of labor.

On our house flips we do have some work completed by professionals but the work we have done usually centers around technical jobs like electrical and HVAC that were not qualified for. 

While a lot of the grunt work and physical labor we do ourselves to protect the profit of the house. 

As a house flipper in the Midwest, if we hired out all the work to be done on a home, there wouldn’t be a profit left at the end, and more than likely we’d lose money.  

So if you’re someone that doesn’t like to get your hands dirty, house flipping is more than likely not a good fit for you.

Flipping Houses Can Lead to High Tax Bills

If you’re going to flip houses then you need to understand and be prepared for the typically high tax bills that go along with house flipping. 

Because house flipping is usually a short-term investment (less than 1 year) you are taxed at the short-term capital gains rate which can be much higher than the long-term rate.  

Beginning and new house flippers are usually shocked by the amount of money they have to pay in taxes on the profits from their flip which can be as high as 40% or more depending on the amount of your overall income.  

If none of the above reasons why flipping houses is a bad idea has scared you off and you’re looking for more in-depth information, a great book I read when first starting out is called “Flip:  How to Find, Fix, and Sell a House for Profit” by Rick Villani and Clay Davis.  The book does a great job of giving a bird’s eye view of the entire house flipping process, while still giving enough detailed information to take actionable steps towards house flipping.  You can check it out on Amazon here.