TOP 5 MOST COMMON FACTORS THAT DESTROY PROFIT ON A FLIP ANDREW CORDLE
Problem 2: Over and under improving
More often than not, rehabs end up under repaired. Chances are if you have done the deal and are looking to
begin repairs on the house, then you have calculated your ARV. You know how much your house should sell
for, but do you know why it should sell for that much?
If you based your ARV on houses that had
granite counter tops, then your rehab needs
granite counter tops. Your house needs
“wow” factors. If you under improve your
house, there is no way you will to turn a
bigger profit on a flip. You will only lose
money from your house sitting on the market
and from having to cut pricing.
The same thing can happen if you over
improve a house. If you completely gut the
inside of a house and expect to get a much
higher ARV than the houses surrounding it, you’ll be bleeding cash.
•Know what updating your ARV entails
•Pay attention to what other houses in the area are selling for
•Have “wow” factors, but don’t overdo it
Problem 3: Not managing time frame or budgeting
As a real estate investor, “Time is money” is a quote to live by. Your time and budget directly affect your profit
on a flip. The longer your rehabs take the more money you lose. It’s as simple as that. Having a system in
place that sets a clear expectation can effectively manage both.
Most real estate investors have a payment plan in place. Whenever specific goals are met, a predetermined
amount is paid. While this is an effective way to manage the money being spent, without an effective time
frame in place it could lead to rehabs being dragged out.
The time frame formula that I use is 10k a week in repairs plus one week. For example, if I have an estimated
40k in repairs, my rehab time should be five weeks. Depending on the resources at your disposal, you may or
may not be able to meet this expectation. Find a timeframe that works for you and stick to it.