5 Most Common Problems With Buying ‘Fix and Flip’ Homes

Northbrook Attorney, Real Estate

“Fix and Flip” is a practice in real estate where you purchase a property, carry out renovation, and then sell it to make a profit. Fix and flip homes are often bought at a discount because of the condition of the property.

It is a lucrative real estate investment strategy, but as with all good things, it has a very worrying downside. Fix and flip homes not only come in less-than-inhabitable conditions but also harbor many challenges for the new owner.

Below are five common problems you are most likely going to face if you purchase a fix and flip home.

Hidden expenses

Upon initial inspection of the property, it is common to rush to a conclusion as regards the cost of renovations from face value alone. But once you complete the purchase, you discover you underestimated how much it would take to get the property to sellable quality truly.

To guard against this, it is important to thoroughly assess the property before even making an offer.

Poor property condition

Fix and flip homes are usually in terrible conditions, but sometimes, there are even worse cracks hidden from sight. There can be faults and gaps that become apparent once renovation starts, and this can cause extra financial strain and delay.These hidden faults can also pose severe structural and safety concerns; thus, you are advised to do a structural integrity inspection after the financial worthiness check.

Financing issues

Fixing and flipping a home costs a lot of money, and without any solid background or experience in the world of fix and flip, you risk failing to successfully achieve your desired outcome. Another financing issue is a weak credit score. To guard against both issues, you need to have a solid business plan ready and seek the help of lenders whose specialties include the fix and flip strategy.

Time constraints

The fix and flip process can often take longer than you planned or budgeted for, leading to delays in the project’s completion and, ultimately, its sale. To prevent any delays or time constraints, set a realistic timeline for the project, ensuring that there is room for any unexpected circumstances, including a delay in permits, bad weather, or whatever else might come up.

Market conditions

The real estate market is very profitable and can serve as a long-term source of passive income, but it can also be very volatile and unforgiving. The market can change at a dime, leaving property owners needing help in selling their assets and turning a profit.

You can avoid this outcome by staying informed on the market trends and setting up an informed and air-tight contingency plan if a sudden market change occurs. Once you understand how to prepare for these common problems, you can make significant steps to minimize the risks of investing in fix-and-flip homes to increase your chance for success.

Profitable real estate investment requires good knowledge of the changing market and laws. At the law offices of Hecht-Schondorf, we prepare and protect our clients for such issues. You can consult with our experienced real estate attorneys here.