What is the most difficult part of fix and flipping?

Question

I've been teaching people different techniques of flipping houses and I was curious to see what challenges most new and experienced investors face these days when rehabbing and flipping properties. I want to be able to mentor my students to the best of my abilities and so the more knowledge I can share with them the better off they will be. I truly appreciate your time and answers.

Please answer this question: What is the most difficult part of doing fix-n-flips/rehabbing properties?

J Scott · Answer

1. Analyzing Deals. Too many new investors fail because they paid too much, at which point there's not much you can do to get back on track.

2. Inspections and Scope of Work. Without knowing how to inspect properties and properly prepare an SOW, there's no way to accurately estimate your renovation costs (and therefore can't know if it's a deal or not).

3. Estimate Rehab Costs. 'Nuf said.

4. Manage the Closing Process. Too many new investors do everything right, up until they get an offer. They then find the closing dragging out, buyer not getting financing and deals falling through. Knowing how to ensure the closing goes smoothly and quickly the FIRST time is essential.

John Mireles · Answer

I agree completely. Not that negotiating a price and working through the expenses don't qualify for "most difficult," but, for me, the most time consuming part of fixing up a house is making all the myriad of decisions that are necessary to create a product that buyers will absolutely fall in love with and want to spend money on. To me, doing the work is pretty straightforward. Figuring out what goes in where, that's where you make your money because if you decide right, the buyers will be there. Decide wrong and you've got an expensive dud on your hands.

Once you do one though, then you can replicate the model and the process becomes easier.

Allan Glass · Answer

The exit, the exit and the exit!

Always know your way out and plan for your worst case scenario. Everything else is fixable.

Troy Springston · Answer

Thanks for the help, you guys ROCK!

One more thing, do you think hard money/private money is up there as well? I know for me, when I first started out, finding a deal with enough room to pay the lender was a big part on whether a deal would work or not. Do you guys find the same issue?

Jon Holdman · Answer

Correctly estimating the selling price. This is, at best, something of a guess because you don't know what comps will be relevant when you sell or which of those the appraiser will choose. If you kid yourself with a high selling price, you'll over pay for the property and spend too much on renovations and lose money on the deal.

Ben Leybovich · Answer

I am amazed that so many beginners gravitate toward flipping, This is some of the most involved enterprise in all of RE.
1. Understand your marketplace correctly, which leads to
2. Estimate retail price correctly
3. Price the repairs correctly, which leads to
4. Make the right offer
5. Have GOOD contractors, which is hard for a newbie without a track record, which leads to
6. Remodel correctly – know what to do and what not to do
7. Structure financing correctly
8. Structure the selling process correctly
9. Buy, so that you have 3 exit strategies

And then there is more…You mess up anything on this list, and you will pay with blood, sweat, tears, money, and debt. Flipping is not for the faint at heart, and in my humble opinion, it is best left to the seasoned pros.

Jennifer Lee · Answer

I agree with good contractors and deals/price.

My challenge is the actual flip bc I almost always decide to hold and rent at the last minute.

Prashant P. · Answer

Getting out of the mindset that you are going to make a ton of money right off the bat like they do in all the reality TV shows.

Also, that it is just like the TV shows where you find a deal, rehab it and sell it in a hour.

Randy F. · Answer

Accurately estimating rehab is definitely tough starting out, but deciding what materials and finishes to price also a challenge starting out. It isnt simply about the cheapest countertop or flooring. Does the countertop compliment the cabinets? Is the structure of the floor adequate to support floor tile? Are the rooms too small for dark flooring? Not enough room in the deal for full renovation, but you can get a great deal on some cherry cabinets? Do high end cabinets at ANY price make sense if they will stand out like a turd in a punch bowl?

Does it make sense to hire an interior design student or recent grad on a small retainer, per project basis, to help pull a design together that fits the style of the home, flows, and fits budget for those first projects? Would approaching a professor work to hook up with a promising student on an extra credit basis?

So, you found a great deal on tile. Should you use exterior grade 3/8" plywood, durock or hardibacker, 1/4" or 1/2" underlayment/ backer? Can you or should you set tile right on the subfloor? Maybe theres a retired remodeler out there that would just love to spend some time on your job sites and let you pick his brain. Heck... He may pay you just to feel needed!

Nate Wong · Answer

finding good contractor and the dealings with contractors is the most single difficult thing. next is finding a good property at the right price.

What is the most difficult part of fix and flipping?

What is the most difficult part of fix and flipping?

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