Why some “good deals” still fail after acquisition

Question

One thing we keep noticing is that many investment mistakes happen after the acquisition decision was already made.

Not because the investor ignored comps.

But because the operational side of the deal was underestimated.

Sometimes the numbers technically work:

* ARV looks reasonable* rents support the projection* acquisition price seems acceptable

But then execution starts:

* permitting delays appear* contractor timelines shift* insurance becomes more expensive* utility upgrades are required* slope/foundation issues surface* holding costs expand* exit timing changes

At that point, the problem is no longer valuation.

It becomes a project management and execution problem.

What’s interesting is that many underwriting models still focus heavily on pricing and comparable sales, while operational risk is often treated more like a rough assumption.

Especially in:

* value-add projects* redevelopment* ADU-heavy markets* older housing stock* complex remodels

Curious how experienced investors here account for execution uncertainty today.

Do you mainly rely on:

* contingency buffers?* local contractor relationships?* experience-based intuition?* conservative timelines?* internal scoring systems?

Or is there another framework that’s worked well for you?

Denise Supplee · Answer

Hello @Georgii Grigoriants:

This is a really important distinction and one that doesn't get enough attention. You're right that most underwriting models are built around pricing, not execution.

After 40+ years as an investor, Realtor, property manager, and now co-founder of a co-investing club, I'd say the answer is honestly a combination of all the options you listed. But if I had to pick the most important, it's local contractor relationships built over time. When timelines shift or surprises surface, who you know matters more than what your spreadsheet says.

Contingency buffers are non-negotiable, but the percentage means nothing if you don't have the right people to actually solve the problem. Experience-based intuition is real, but it only develops after you've been burned a few times first.

The operational side of a deal deserves the same rigor as the financial model. Great question to raise here.

Georgii Grigoriants · Answer

@Denise Supplee

Really appreciate this insight. It’s interesting how often execution risk gets treated as secondary until the project actually starts moving. The contractor relationship point is especially valuable. Thanks for sharing your experience.