7 Common Obstacles Investors Face With Fix & Flips

Most often when people think of real estate investing, they automatically think of fix and flipping homes. This strategy has proven a popular route to building wealth through the investing side of real estate. However, it isn’t as easy as many of the tv shows make it out to be. One thing the shows don’t tell you is that this strategy requires knowledge and skill in order to see positive returns on rehabbed properties.

Before choosing a property for your next or first project, learn some of the common obstacles many fix and flippers face when they’re out in the field.

7 Common Obstacles When Working With Fix & Flips

1. 1. Locating the Right Property

Not every home you see will make a smart fix and flip investment. Taking the time to look for the right property in a good neighborhood is always the first step when getting started. It’s important to keep an eye out for the homes that look distressed or outdated while still being below the market value. When it comes to fixing up and flipping a property, you want to make sure that you’re selling the home in a shorter time frame as opposed to letting the home appreciate slowly over time.T

Tips to Finding Great Leads:

• Traditional sale through Agent of FSBO (for sale by owner)
• Probate properties
• Foreclosure listings or Auctions
• Short sales
• Tax lien properties
• Wholesale properties

1. 2. Buying at a Profitable Price

When purchasing homes, make sure to know the highest price that you are able to bid while staying in a profitable range.

Things to Consider When Making Offers

• Current Market Conditions
• Property’s True Value
• Values & Recent Sale Prices for Comparable Homes
• Estimate Cost for Repairs & Upgrades
• Potential Listing Price After Repairs & Upgrades

With this strategy projects tend to have a longer return time due to having to work on the property. With that being said, try not to lose sight of the end goal which is making a profit. Most often an appraisal can be worth it especially if you’re not sure of the value. This provides a rough estimate of the current properties value.

1. 3. Funding or Financing Projects

It doesn’t matter if you plan on financing your own projects or if you plan to use an outside option, you always want to have enough funds to cover the price of buying the home as well as the repairs and/or upgrades.

Funding Options:

• Personal Funds
• Equity from Buy & Hold You May Own
• Traditional Mortgage Lender
• Private Money

1. 4. Building a Trustworthy Network

As we all know, being an investor or agent in real estate requires having strong relationship building skills. Due to this, you want to make sure you have a sturdy team behind you that you can trust in helping you through the project timelines. With the flipping strategy, you’ll find yourself having to depend on contractors, suppliers, and other professionals to help keep your schedule and budget in place. On top of that, you’ll also need buyers in place when the home is finished and ready for selling.

A lot of investors want to do everything themselves but without having construction experience or the necessary specialized skills you’ll end up encountering more issues along the way. Most times, investors don’t take into account roofing, electrical, and plumbing factors and trying to do this lone wolf will end up costing more in the long run. It’s also extremely difficult to grow your investing business when you’re your only employee.

Keeping a positive attitude and having a solid reputation goes a long way when building your network up. Being able to maintain sturdy relationships and treating your team with respect will help when it comes time to meet your obligations. Those that treat others with respect often have a great team to reflect their persona.

1. 5. Staying Organized

With the fix and flip strategy it is extremely important to stay organized and have a sense of good skills for project management. The last thing any investor wants is to have to chase down contractors and struggle to keep up with deliveries. That’s why you need to keep in mind your project timeframe and have your budget on the back of your mind. It doesn’t end once the property is finished. Remember as the investor you have to stay on top of the closing process as well.

Luckily, with today’s market being as technologically advanced as ever. It’s easy to work with different software solutions in terms of being organized and for project management. When the time comes, you may want to invest and research on bringing an assistant onboard to stay on track.

1. 6. Market Volatility

Over the years, research has made it possible to see that real estate investments tend to have great profitable outcomes when you’re thinking on a long-term scale. In fact, many of the problems tend to arise on a short-term scale due to the market fluctuations.

Whenever using the fix and flip strategy, investing and working under a short-term scale will help dictate your success. For speedy profit, always remember the timeline is shorter to sale. Having uncertainty in the market has an effect on your profit.

One sure way to fight off that uncertainty is to research the market trends and understand both sides to predictions made by experts. It's also important to understand that doing the research doesn’t eliminate all the risks ahead but it does play a good role in staying prepared in the different outcomes to help build a solution if it comes down to it.

If worse comes to worse and you’re unable to sell the property, plan ahead and see if turning the property to a rental is beneficial to your business plan. Don’t stay down if things go south. Do the research and make a backup plan to help pick yourself back up.

1. 7. Unexpected Conditions

Always plan for the unexpected! Secure insurance to protect you and your investment in the property when you’re going through the renovations process. Natural disasters like pandemics. Hurricanes, wildfires, earthquakes or even things like break ins can happen and are out of an investor's control. That’s why having a plan to combat any of these kinds of problems is important to have in place.

Of course it is always best to stay positive and optimistic but it’s always smarter to plan ahead and have that coverage beforehand if anything were to happen.