The most common failure. Investor gets excited, uses the wholesaler's ARV, skips or rushes the rehab estimate, and offers more than the 70% rule allows. The project is under water before the first nail is pulled. Fix: pull your own comps every time. Run the numbers before you negotiate, not after.
Property opens up to reveal foundation issues, mold, fire damage behind walls, or outdated electrical that all has to go. Budget was $45,000, final cost was $90,000. Fix: get a full inspection before closing including structural, roof, HVAC, and electrical. Price the unknown risk into your offer.
Contractor takes a large draw, disappears, and you're left with a half-finished project and lien exposure. Fix: draw schedule tied to completion milestones, not calendar dates. Never pay ahead of work completed. Lien waivers with every draw.
You buy in a hot market. Six months later when you list, rates have risen, demand has softened, and your ARV came in $30,000 below projection. Fix: use conservative ARV assumptions. Have a BRRRR/rental exit ready as a backup if the flip profit evaporates.
Almost every failed flip traces back to one of two roots: bad numbers at acquisition or inadequate due diligence on condition. Both are preventable with process. The investors who lose money on flips are usually the ones who moved too fast, trusted other people's numbers, or skipped inspection steps they knew they should have done.
Dan White is a licensed Virginia real estate agent at Pearson Smith Realty and founder of FreeDealCalc.com. He has been investing in real estate for 20+ years.