Collecting Keys - Real Estate Investing Podcast

House Flipping Guide: Rehab Budgets, Contractors and Exits

House flipping means buying a property below market value, renovating it and reselling it. The profit gets made or lost in three places: the purchase price, the rehab budget and how long you hold. This guide collects what Mike DeHaan, Dan Austin and Dylan Koch have said about estimating rehab, managing contractors, picking the right house, and what to do when a flip won't sell.

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Should you start with flipping, or wholesale first?

The hosts changed their minds on this. On EP 364, Cody Cressey and the hosts argued wholesaling should come first because it raises capital and puts you at the center of your market, with flips as opportunistic plays. On EP 341, Dan said he keeps three months of operating costs — about $45,000 for a business with $15,000/month overhead — in the bank before taking flip risk at all.

By EP 418 in 2025 they had flipped that position. Deal flow is harder to source, wholesaling requires knowing every part of the business, and flipping teaches you rehab costs, comping and what buyers want while letting you buy from wholesalers. Their caveat: vet wholesaler deals yourself. They describe undisclosed bowing foundations and false subdivision claims, and say one Spokane hard money lender stopped lending on deals from certain wholesalers.

On EP 69, Mike answered a listener with $20,000 who wanted to flip. That's usually too thin, since hard money lenders typically want around 10% down plus reserves for rehab, carrying costs and living expenses.

From: EP 418 · EP 69 · EP 364 · EP 341

How do you actually estimate rehab costs?

On EP 32, Mike and Dan describe a two-step process. First, build a fast, conservative budget from one walkthrough or a set of photos using per-item numbers. That's enough to make an offer. Second, after you're under contract, do a detailed measurement walkthrough with your contractor so materials can be delivered and work starts the day of closing.

On EP 329, Dan explains how to build numbers with no construction background: identify comps, decide what the finished house needs to look like, then scope from photos. He watches the big-ticket items — HVAC at roughly $7,000–$10,000, a Spokane roof around $15,000, knob-and-tube wiring, and single-pane wood windows at roughly $500–$1,000 each. He treats the 10–15 day inspection contingency as paid education: a $300 foundation inspection is cheap next to a $12,000 surprise after closing.

From: EP 32 · EP 329 · EP 444 · EP 114

What are the three most common ways flippers lose money?

On EP 114, Dan breaks down a flip he and Mike lost roughly $50,000 on and names three culprits: overestimating ARV, underestimating repairs, and underestimating the timeline. On comps he starts with natural barriers like freeways and main streets, then blends low, middle and high sales instead of cherry-picking the top. Skipping a proper walkthrough on that deal meant missing an actively leaking roof (about $25K) and a bad AC unit ($5K). Long holds added carry costs of $30 to $100 a day, a squatter, failed pipes, and a market shift that dropped the ARV from $650K–$700K to a $500K sale with concessions. They sold at a loss to free over $100,000 for higher-ROI projects.

Mike tells the same story from the other end on EP 156 and EP 383, about his 2018 first flip. His was the only house in the neighborhood without a garage, dropping an expected $280–290K ARV to roughly $256K. He turned the water on in a house vacant through winter and the pipes burst. There was no heat source at all. A contractor he met at a meetup took about $18,000 with no written agreement and disappeared. Four months of work netted him about $4,000.

From: EP 114 · EP 156 · EP 383 · EP 340

How do you manage contractors and the schedule?

On EP 46, Dan says newer flippers should hire a GC who runs his own crew rather than scheduling subs themselves — you pay more, but you borrow his relationships. Interview them: ask for photos of past jobs on their phone, how they'd schedule the work, and what they'd sub out. Someone who subs all electrical means a $200/hour call to change a valve. He refuses deposits, pays weekly or by phase for work performed, and holds the final third until he has the keys.

On EP 59, Dan argues schedule management is the biggest lever on profitability. He budgets roughly $100/hour for a crew — $4,000 a week, $16,000 on a four-week project — which usually exceeds materials. In a falling market, a four-week project that becomes eight weeks is a different deal because new comps appear before you sell. On EP 347 he adds that bad contractors should be fired immediately: another month of $2,000–$3,000 carry costs beats letting someone limp along.

From: EP 46 · EP 59 · EP 347 · EP 334

Which houses make good flips?

On EP 25, the hosts prefer flips with real value-add — added square footage, finished basements, garage conversions, removed walls — over cosmetic gut jobs, because added square footage lets you math out new value from cost-per-square-foot comps. They avoid houses over roughly 2,500 square feet because once you start you must finish every room. Mike's live-in flip on EP 51 is the clearest example: finishing a basement himself turned a 3/2 into a 5/3, added over 1,000 square feet, and produced an $80,000 cash-out refinance.

In softer markets they get narrower. On EP 86 they described buying non-unique houses at the affordable price point where the buyer pool is widest, keeping rehabs simple, and shaving roughly 10% off ARV instead of pricing in appreciation. On EP 341, Dan would only take 'carpet and paint' flips — LVP, paint, hardware, light fixtures, a cheap vanity. If the furnace, roof and floors all need work, he passes even at $45,000 projected profit.

From: EP 25 · EP 51 · EP 86 · EP 341

What are your options when a flip doesn't sell?

EP 76 is built around this question. The three realistic options: drop the price and take the loss, convert to a rental or lease-to-own, or hand the property back to the lender. Their buy criteria is that worst case the property rents at breakeven after PITI, utilities and reserves — that's what creates a rental exit. Mike took a $30,000 loss in 2020 to recover about $128,000 and redeploy it.

By EP 471 the hosts had sharpened that. They argue refinancing an unsellable flip into an expensive DSCR loan usually turns a small loss into a bigger one once you count refi costs, a higher rate, taxes, insurance and a sale months later anyway. Refi costs feel free because they get wrapped into the loan, but they're real money. They also warn about sunk-cost bias.

On EP 469 they put it plainly: in a soft market, if a flip isn't selling, it's priced too high. One of theirs sat at $350,000 for a month and sold the day after dropping to $335,000.

From: EP 76 · EP 471 · EP 469 · EP 379

How much flip risk should you carry at once?

On EP 45, Dan makes the case for written buying principles set before the market shifts. Holding 10–20 flips in inventory turns a bad market into a business-ending problem; holding one or two does not. He and Mike once took a certain, stronger buyer over a higher offer, losing a few thousand dollars but recovering 96–97% of their capital. On EP 457 they return to the math: carrying ten flips can mean two to three times your net worth in debt for maybe a 10% return.

There's a counterpoint from their own show. On EP 444, Dylan argues volume is a form of safety, citing a company that lost money on 5 of 250 deals in a year — the riskiest place to be is doing one or two deals when a loss hits. On EP 475, as lenders, Mike and Dan say they see most borrowers with $40K–$60K in the bank, sometimes $17K, even after flipping 50 houses, because they roll every deal into the next.

From: EP 45 · EP 457 · EP 475 · EP 347

Frequently asked questions

How much money do you need to flip a house?

On EP 69, Mike said $20,000 is rarely enough alone, since hard money lenders typically want around 10% down plus reserves for rehab, carrying costs and living expenses. His alternatives were partnering with someone who has money and experience, or putting the cash into marketing to find deals.

Should you pay a contractor a deposit?

Both hosts say no. On EP 46, Dan pays by phase or weekly for work actually performed and holds the final third until he has the keys. On EP 156, Mike describes a contractor taking roughly $18,000 with no written agreement and disappearing.

How long should a flip take?

On EP 59, Dan set a rule of skipping anything that couldn't be rehabbed in under a month unless margins were exceptional, since crew labor ran roughly $4,000 a week. On EP 457 the hosts add that you should judge a flip against the neighborhood's average days on market, not 2020–2021 speeds.

Is it better to flip or wholesale a deal?

On EP 25, the first filter is cash position, since a flip ties money up four to five months. On EP 341, Dan compared roughly $45,000–$50,000 of flip profit against a $10,000–$15,000 wholesale fee, but warned that the fee reinvested into marketing at a $5,000 cost per deal could produce three more deals.

What happens if the appraisal comes in low?

On EP 340, Dylan lists resubmitting comps through the lender's underwriter, splitting the difference with the buyer, or carrying a second position for the gap on the right deal. The hosts prefer front-loading it by supplying comps and a written improvement list and meeting the appraiser.

All 72 episodes on house flipping