Top 5 Reasons Fix & Flips Fail
If flipping a home were easy, everyone would do it! Anytime you’ve got potential to earn tens of thousands of dollars in profit, people will flock by the millions to try to get their piece.
Unfortunately, most never flip a home. Such a competitive market weeds out the lazy, unskilled, less-determined people, leaving only the investors with the best tools, skills, and desire to reap the rewards.
Over 200,000 homes were flipped in 2017 – an 11-year high. The volume is there, despite what many would-be flippers think after a few weeks of looking.
So let’s get back to basics for here.
What are the real reasons that deals fail?
Top 5 Reasons Fix & Flips Fail
Not Enough Money
This industry is filled with unexpected – and usually unfortunate – surprises. Things like:
- The rehab takes longer than projected.
- You find unexpected issues with the house (mold, structural issues, etc.).
- The final numbers come in slightly different than expected and you need a bit more cash to close.
And plenty of others!
Even if you qualify for our 100% financing loans, we still want our borrowers to have an extra $5,000 on hand for emergencies like these. Too often a deal fails because a few thousands dollars couldn’t be found.
Fall in Love With One Property
This is it… the one property that’s going to make you rich! You’ll finally be able to leave your job with a nest egg to do your next deal…
But then you crunch ALL the numbers… and reality sets in. It’s not a profitable deal.
You’re crushed. You’re not sure if you want to keep doing this. You quit altogether.
This happens more often than you think. Potential borrowers come to us with a “unicorn” deal, but then we help them plug the numbers into our Advanced Deal Analysis software, and the numbers come back unfavorable. We give them the bad news.
A true investor realizes that’s just how the industry works and moves on.
Making One Offer at a Time
Similar to above, don’t stick it out with a single property in mind… have five or ten that you’re working on!
“But I’m brand new… I can’t handle the rehab on five properties at the same time!”
First off, you’re fretting over an extremely unlikely scenario.
Second off, there are solutions to this! You can always turn down a deal if you find that multiple offers are going through at once. Also, you can wholesale the “extra” properties to get them off your hands with a tidy profit. Then focus on a full rehab for the one with the most profit potential.
Bad Evaluation Skills
Honestly, your money is made during the evaluation process. If you understand how to properly value properties, you’ll be able to walk away from the bad ones, and go all in on ones with massive potential.
Those without evaluation skills are throwing darts in the dark. Who knows what the outcome will be.
That’s one skill you can’t fake your way through.
Don’t Know Enough
What strategies actually work for finding new deals?
How do I negotiate a better price?
Should I wholesale this property or do a full fix & flip?
What parts of the home should I rehab?
What materials should I use in the rehab?
How do I find a good General Contractor?
What type of funding should I use for this deal?
How do I create a legally-binding contract that benefits me?
Flipping a home requires many steps to complete, and each one contains many pitfalls. That’s why we offer extensive training along with our funding, as well as dedicated project managers to answer questions every step of the way.
Want to flip your first home? We’ve got the expertise, the training, and the funding. We just need dedicated people who aren’t afraid to roll their sleeves up: