The Most Common Mistake: Looking Only at Purchase and ARV
The math that kills flips
Investor says: “I can buy it for $300,000 and sell it for $500,000. That's $200,000 profit.”
No.
Purchase$300,000
Renovation$90,000
Financing$25,000
Taxes, insurance, utilities$10,000
Selling and closing costs$35,000
Unexpected repairs$15,000
Total$475,000
Sell for$500,000
The “easy $200,000 profit” became approximately $25,000 before taxes and other possible costs.
Hard Money
Common because it can potentially finance acquisition, renovation, and distressed property in one structure. Funds for repairs may be distributed through draws. See how hard money loans work and when to use them.
Private Money
An individual or private investor may finance the project.
This still needs:
- Proper legal documentation
- Promissory note
- Security instrument where applicable
- Clear repayment terms
Friends and family do not eliminate legal risk.
Cash
Cash avoids financing costs but concentrates investor capital in the property.
The economic question is not merely “can I pay cash?” It is “is this the best use of my capital?”
Renovation Draws
If the lender funds rehab through draws, understand:
- Who pays contractors first?
- Is reimbursement after inspection?
- How quickly are draws processed?
- What documentation is required?
- Is there a draw fee?
Cash-flow problems can stop a project even when the project is profitable on paper.
Carrying Costs
Every extra month can mean:
- Interest
- Property tax
- Insurance
- HOA
- Utilities
- Landscaping
- Pool maintenance
- Security
Time is money in a flip. Estimates and financing terms should both be lender and contractor-confirmed for the actual project.
Las Vegas-Specific Due Diligence
Investors should pay particular attention to issues such as:
- HVAC condition
- Roof
- Pool equipment
- Plumbing
- Electrical
- Solar agreements
- HOA restrictions
- Unpermitted additions
- Casitas
- Converted garages
- Property records
Contractors evaluate renovation condition and cost; Lisa helps with the comparable sales, resale positioning and market demand side. The two analyses should stay separate.
Property DNA Before the Flip
Property DNA can be useful as an additional research layer before purchase.
It does NOT replace an inspection, title search, appraisal, contractor evaluation, permit research or legal advice.
Research the Property Before You BuyHow Lisa Helps
Lisa can help evaluate both ends of the transaction.
Acquisition
What is the property worth today?
Exit
Who is the likely finished-home buyer? What competing homes will they see? What renovations actually matter to that buyer?
A flip should be designed for its exit market, not merely the investor's personal taste.
