What’s Your Biggest Lesson Learned From a Fix-and-Flip Project?

Question

Hi everyone,

Fix-and-flip projects can be incredibly rewarding, but they always come with challenges. I’ve recently started focusing on markets like Houston, South Florida, and Indianapolis and would love to hear from seasoned investors:

• What’s the biggest lesson you’ve learned from a past project?
• Any tips on avoiding unexpected costs or delays during rehab?
• How do you handle situations where ARV comes in lower than expected?

I’m always looking to improve my process and would be happy to share some insights I’ve gathered on deal evaluation and contractor management. Let’s learn from each other and make our next flips the best ones yet!

Looking forward to your thoughts!

Kerry Noble Jr · Answer

always add 15% to your budget lol

be conservative with your ARV.

Jonathan Klemm · Answer

Hey @David Martoyan - There are definitely too many lessons to count lol.  I've flipped about a dozen properties here in Chicago, and quite honestly, it felt like something different went wrong on each one of them.

My biggest piece of advice is to KEEP IT SIMPLE starting out.  Slowly build out a repeatable process...if you continue to change things (as in different types of properties, different levels of renovation, different finish material, different neighborhoods, etc.) you create more variables and make it harder to solve to the problem.

I am a math guy and less unknowns/variables you have the easier the problem will be to solve.  If you SLOWLY add variables after you have solved the same problem a couple times it gets easier with less risk.

I sadly had a very hard time with FOCUS and switched things up on nearly every project, creating new challenges.

Treat flipping like a business that you want to scale, and you will be successful!

Bruce Woodruff · Answer

That there are no guarantees. Everyone needs to be extra careful and do their homework. And then do it again.

It is actually possible to have a super experienced General Contractor, a very deep pockets money partner, and still lose money on a flip.

The most common reason, in my experience, is having a project run over schedule and placing the property on the market during the off-season.

Evan Polaski · Answer

@David Martoyan, the deal you feel you "need" to do is the deal you will likely lose money on.  Granted, we didn't lose money, but out last flip was bought slightly out of "we have money sitting in a money market, it has been a year since we sold our last flip, and we need to be making some money".

We made all of $10k on a $400k investment in about 6 months.  If we had used a lender, we would have lost money.

And other is: know the market inside and out.  Latest flip, same are we live in.  Recent renovated comp was larger, but on a PSF, we would should have made over $100k.  But, the people looking in our neighborhood (about 1.3 mi from our house) are all older.  We had a split level.  The strongest comp was a ranch.  Most people that toured it were retired couples.  So, they would pay a premium for a ranch, but would not touch the stairs.

So like all real estate, it is know the market inside and out.  Who is looking in that neighborhood? What features are they wanting?  Are the comps, really comps (i.e. ranch vs two story, sidewalks versus no sidewalks, subdivision vs not)?

Todor Ialamov · Answer

Be conservative on budget and time. Add at least 15-20%

Determining ARV is key.

Be upfront with your contractors. Do not pay them in full before they close all their permits.

Flipping multi families is less risky. You can always rent the units if marketing turns.

Good luck!

Ryan Irwin · Answer

Constantly manage bookkeeping and cash flow to make sure you stay on budget and/or make adjustments when (not if) things come up to stay on track.

David Martoyan · Answer

@Todor Ialamov

Being conservative on budget and time is so important, and I completely agree about the importance of ARV and managing contractors carefully. And yes flipping multi families is definitely less risky, but not as applicable and available to everyone as single families. Appreciate the insights!

David Martoyan · Answer

I've learned that the unexpected always happens, whether it's delays or unforeseen expenses, so having a system in place to monitor finances regularly helps make adjustments before they become bigger issues. Recognizing red flags early are key to staying profitable. Appreciate  the reminder!"

Kaden Nguyen · Answer

Thank you for this post and all the great advices and insightful comments.I’ve only done a few flips since I focus more on BRRRRs and value-add for my rental portfolio. Like most have already stated, there will always be some type of curve ball in a flip, small or big.

So I always try to plan ahead, triple check my due diligence, and be VERY conservative with my underwriting. Plan for the worse and hope for the best.

David Martoyan · Answer

@Annie Schrock thanks for the comment, definitely having the right contractor, always meeting your deadlines and doing full due diligence can make or break a deal!

What’s Your Biggest Lesson Learned From a Fix-and-Flip Project?

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