I clearly remember my first house flip: It was May of 2010, when Christina was five months pregnant. Located in Santa Ana, the house was up for auction. We bought it for $115,000, poured $15,000 into renovations, and sold it for $169,000. We made a profit of $34,000, which felt like $34 million back then!
But this first flip ended up paying off in a far more surprising way: It landed us on reality TV.
From house flippers to 'Flip or Flop'
While renovating this house, we'd made a home video, and I got this crazy idea to send it out to production companies to see if it could be turned into a reality TV show. I remember being so excited when I got a response from HGTV.
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By July of 2011, we'd shot a pilot. The studio loved it so much, they signed us on before it even aired. It happened so easily, like it was fate.
Then we got the contract. That's when I realized we had to flip—and film—13 houses in 10 months.
I was like ... um ... how do we do that?
To put it in perspective, the entire year before, Christina and I had only flipped three houses. So, to flip 13 homes in less time would require a pace unlike anything we'd ever experienced.
As scary as it was, we agreed to try—and made every mistake in the book.
Now that we've filmed seven seasons of "Flip or Flop" and flipped hundreds of homes, I look back at these early days and laugh, and acknowledge that, although stressful, it was all worth it. The experience also taught me a ton that might benefit other aspiring house flippers out there, as well as regular home buyers, sellers, and owners who plan to renovate.
So, in an effort to warn others of all that can go wrong with a house, here are a few of the most embarrassing mistakes I made on "Flip or Flop" that, thankfully, never got much airtime on TV.
I hired contractors because they were cheap
One of the first houses we flipped for the debut season of "Flip or Flop" was in Anaheim, CA. I was so excited, I will never forget the feeling. I got multiple bids from contractors, and ended up going with the lowest to save money.
In the end, I paid the price. It was an awful experience. The job was supposed to take two months. Instead, it took seven months, and the budget went up by 50%.
Worse yet, I would go to the project and half the time, no one was there. It was a nightmare. I would call the contractor and if I was lucky to get a call back, he would say he had other jobs. I was like, "What do your other jobs have to do with you not doing this job?”
After many months of dealing with these contractors, the house was finally done. I got it listed and into escrow right away, thinking I was finally in the clear. But it wasn't that easy.
I didn't keep an eye out for liens
A week before closing this real estate deal, I was informed that we couldn't close. At all! The reason: A lien had been placed on the property for $3,000 from a subcontractor who'd done driveway work.
Thing is, I had no idea who this subcontractor was. I had to call him and ask what was going on. He informed me that he was never paid. My contractor had never paid this subcontractor.
I called the contractor to get the money, and he pretty much said to kick rocks.
I was then faced with two options. One, cancel the escrow and go to small-claims court because I could not close with the lien. Of course, I knew the defendant wouldn’t show and, even if he did, would never pay. Two, pay the $3,000 and move on with my life.
I sucked it up and paid the $3,000. This is an example of opportunity cost: The amount of time and energy it would have taken to get that $3,000 would have actually cost me money in the end. So, I put my energy toward finding new houses where my efforts would bring me a much higher return than that $3,000.
It was the right decision. But boy did it hurt to know this contractor got away with murder.
I didn't bother to stage homes
When I first started flipping houses, I never staged the properties. I always thought the homes I remodeled looked good enough, so I left it at that.
Yet as time went on, more investors came into the market with remodeled homes. At that point, I needed to stand out from the competition, so I decided to try staging a house. The results were amazing: We received multiple offers in a shorter amount of time, and sold for more money.
As a result, on every episode of "Flip or Flop," we stage the properties, because we know it’ll return the highest price possible.
Early on, I also didn’t think curb appeal was a big deal. But as time went on, I noticed more activity on houses that looked better on the outside. Since then, I make sure all of my properties have beautiful curb appeal.
It's a fact: First impressions count. So if a house needs it, I suggest you get a fresh coat of paint, fix anything that looks damaged, and clean up the landscaping.
I didn't make sure buyers were qualified
When I was new to the business, I was so eager and excited to get the home sold, I didn't care if the buyer had been pre-approved for a mortgage. Because of this, I went into escrow with unqualified buyers who ultimately canceled, wasting everyone’s time. I learned that an offer means nothing without the proof that the buyers can actually get financing.
Now what do I do when offers come? I always pick a buyer who provides a full mortgage pre-approval, proof of funds, as well as anything else needed to get a loan. So many times, I see offers with no pre-approval, no proof of funds, nothing. I immediately put them into the trash. So should you—or risk learning these lessons the hard way, like I did.