House Flipper – The 7 Most Common Challenges Real Estate Investors Face

Flipping houses or other properties is one of the most common types of real estate investing. Popular shows make flipping a house look easy. Yet, the process requires knowledge and skill to navigate the ins and outs of house flipping so that the real estate investor makes a profit.

For women real estate investors, the stakes may feel higher. Not only do you face the common challenges for flipping a house, but you also face the barriers female real estate investors must overcome. These include securing lending and gaining a seat at the table in the male dominated investment spaces.

At Real Estate Investing Women (REIW), we help women gain the knowledge and confidence you need to succeed in real estate. We offer training and resources to help smooth your journey and create a likeminded community in real estate investing.

Seven Common House Flipper Challenges

1 – Locating the Right Property

Finding the right property is the first challenge when seeking to flip a house. Not every house makes for a good flip. To make a profit quickly, without waiting for a property to naturally appreciate over time, you must buy below market value. A home listed below market value usually needs repairs or another type of rehab.

Real estate investors have several strategies to find a house to flip:

  • Tradition sale through a real estate agent or for sale by owner
  • Probate properties
  • Foreclosure lists or auctions
  • Short sales
  • Tax lien properties
  • Wholesale properties

In addition to the strategies to find a lower priced property, look for areas where the market values are increasing but aren’t maxed out. You want a property in a neighborhood with the potential to grow.

2 – Buying at a Profitable Price

For a house you plan to flip, the offer must work to your advantage. This is not the time to allow your ego to get into a bidding war. That’s what you want your buyer to do when you have a rehabbed home ready to sale.

Instead, consider the market conditions and the property’s true value before you construct your offer. Look at value of comparable houses in the area. Consider the cost for repairs and the likely listing price after the repairs. Making a profit is the main point of a house flip. Don’t lose sight of this objective.

You may also want to pay for an appraisal. If you must secure lending to purchase the home, the lender may require an appraisal. Either way, an appraisal provides the estimated current value of the home. You can then make a fair offer that protects your investment.

3 – Securing Funding

You need access to funds if you plan to flip a house. You must not only pay for the property itself, but you also need to fund the repairs. Even if you find funding through a mortgage provider, homes purchased by real estate investors may require a higher cash down payment.

You must decide if you want to use your own cash or money from the profit of a different investment. Also, it’s possible to find private money or other people’s money to pay for the real estate investment. The bottom line is you must secure funding of some type to invest in a flip.

4 – Building a Trusted Network

Real estate investing is a relationship business. Without trusted relationships within your network, you’ll struggle to succeed. This is especially true with house flipping where you must depend on contractors and suppliers to meet their obligations for the schedule and budget.

While some tasks when flipping a home are DIY, if you plan to grow a vibrant real estate investing business, you can’t do all the work yourself. Not only that, but some tasks require skilled professionals, like roofing, electrical work and plumbing. Not hiring the right people will cost you more in the long run.

Your attitude and reputation are the best ways to build a trusted network. When you treat people well, they’ll want to work with you again. Also, hold up your end of the deal and keep your word. As your business grows, so will your network.

5 – Staying Organized

With any type of real estate investment, organization is key to keep you out of trouble. But, it is especially important with house flipping. Invest in software solutions to keep you organized. From the closing paperwork to the repair process, organization matters to keep you on track.

Manage the details well so that you don’t exceed your budget or timeframe to complete the project. Also, a lack of organization or project management skills could result in paying more for services due to late fees or rush projects.

6 – Market Volatility

Real estate makes a solid investment in the long term because real estate almost always grows in value. In the short term, the real estate market may experience volatility. When flipping houses, the focus is on the short term. The goal with a flip investment strategy is a quick turnaround. This means surprises in the market may present challenges for the investor.

Reduce your risk by researching market reports for the local market and real estate predictions for the next few quarters. While you can’t eliminate all risks, research and knowledge help investors make an informed decision about the best time to buy.

Also, it is good to have a backup plan to support your flip investment strategy. For example, could you turn the property into a short-term or long-term rental property? Do you have the funds to cover the loan if the property doesn’t sell quickly? Good business planning limits risks.

7 – Expecting the Unexpected

When flipping a house, you must prepare for the unexpected. Ensure you obtain the right insurance to protect your investment during renovations. Disasters occur, like extreme weather, fires, theft or vandalism. While this is only a small chance, it is still possible. The best investors know to expect the unexpected.

Flipping Houses Make a Solid Investment Strategy

While it’s wise to understand the challenges and risks of house flipping, it still makes a solid investment strategy. Be prepared for the challenges and educate yourself on the best practices and processes.

At REIW, we offer a support network for women in real estate. Our organization provides training, coaching and other resources to empower you to move forward confidently as you venture into flipping houses. Sign up for one of our live events today.