5 Signs a Property Is a Bad Fix and Flip Deal
Not every distressed property is a diamond in the rough. While the fix and flip business is built on spotting potential others miss, experienced investors know that some properties just aren’t worth the risk - even if the numbers look promising at the first glance.
Before you pour time, money, and energy into a deal, here are 5 major red flags could signal a bad fix and flip investment - and how to evaluate them smartly with support from lenders like Barnett REI Finance.
Overpriced Purchase Price Compared to ARV
One of the most common mistakes investors make is overpaying for the property relative to its After Repair Value (ARV). If you can’t buy low, it’s almost impossible to sell high, especially once you factor in rehab, holding costs, and financing fees.
Watch out for:
Weak comps in the area or inconsistent pricing
High list price relative to nearby renovated homes
Unrealistic ARV assumptions based on overly optimistic upgrades
Rule of thumb: Use the 70% rule — don’t pay more than 70% of ARV minus repair costs
2. Major Structural or Foundational Issues
Some issues go way beyond cosmetic repairs. If a home has foundation damage, roof rot, plumbing, or electrical system overhauls, you’re likely looking at high costs, permit delays, and unpredictable project timelines.
Red flags include:
Visible cracks in the foundation
Sloping floors or sagging ceilings
Water damage in basements or attics
Electrical system that need total rewiring
Unless you have deep experience and a big budget, these are the flips to skip.
3. Poor Location or Limited Buyer Demand
The best renovations can’t fix a bad location. If your property is in an area with low buyer demand, long DOM (days on market), or declining values, even a perfectly finished flip may sit unsold or sell at a loss.
Red flags include:
High crime rates
Declining population or job growth
Homes in the area sitting unsold for months
Lack of nearby amenities, schools, or access
Use market data and local trends to ensure your exit strategy aligns with real demand.
4. Unpermitted Work or Legal Complications
Buying a property with unpermitted additions or legal encumbrances can lead to huge headaches during renovations and resale.
Common issues:
Additions or garages not built to code
Open or expired permits on the property
Liens or title disputes
Zoning violations or restrictions
If the city gets involved, your project could stall for weeks — or worse, cost you thousands to correct.
5. Too Small of a Profit Margin
Even if the numbers technically “work,” if the margin is razor-thin, a single surprise could wipe out your profits. Unexpected costs, market shifts, or a longer-than-expected hold period can turn a slim margin into a break-even or negative return.
Consider:
Do you have at least a 15-20% profit cushion?
Can you afford to hold for longer than planned if needed?
Will your lender cover enough rehab to reduce upfront cash?
Barnett REI Finance works with investors to analyze margin scenarios and ensure deals are funded based on realistic returns, not just wishful thinking.
Final Thoughts: Walk Away from the Wrong Deals — Fast
A great fix and flip investor doesn’t chase every deal — they learn to walk away from the wrong ones early. Trust your numbers, do your due diligence, and when in doubt, partner with a lender who understands what a good deal really looks like.