1) Don't inflate the ARV — use conservative comps. 2) Budget rehab with contractor bids + 15–20% contingency. 3) Budget the full holding cost on a realistic timeline. The rest are below. See Requirements & How to Qualify.
On this page
Deal & ARV mistakes
1. Inflating the ARV
Your loan caps at a % of ARV and your margin lives on it. Use conservative, comp-supported values. Test it →
2. Overpaying (breaking the 70% rule)
Purchase > ARV × 0.70 − rehab kills the margin before you start.
3. Ignoring the comps that matter
Price to recently sold, comparable, nearby finishes — not aspirational listings.
4. Over-improving for the neighborhood
Don't build finishes the comps won't pay for. Match the market.
Budget & timeline mistakes
5. Underbudgeting the rehab
Use licensed contractor bids, not guesses, and add a 15–20% contingency.
6. Ignoring holding costs
Interest, taxes, insurance, utilities accrue monthly. A 2-month delay can erase the profit.
7. Assuming the fastest sale
Budget a conservative timeline; the market can shift mid-project.
8. No reserves
Keep a cushion for overruns and carry. Don't drain cash to close.
Loan & process mistakes
9. Taking the first quote
Compare total cost (rate + points) over your hold, not the sticker rate. Rates →
10. Missing Dutch vs non-Dutch interest
Dutch charges interest on undrawn rehab too — ask, and prefer non-Dutch when you can.
11. No exit plan
Know before you buy: sell, or refi to DSCR (BRRRR). Don't improvise at the balloon.
The Don't / Do checklist
| Don't | Do |
|---|---|
| Inflate the ARV | Use conservative sold comps |
| Overpay past the 70% rule | Buy at/below ARV × 0.70 − rehab |
| Price to aspirational listings | Price to recent sold comps |
| Over-improve for the block | Match neighborhood finishes |
| Guess the rehab | Use contractor bids + 15–20% contingency |
| Ignore holding costs | Budget carry + taxes + insurance |
| Assume the fastest sale | Use a conservative timeline |
| Drain cash to close | Keep reserves for overruns |
| Take the first quote | Compare total cost across lenders |
| Overlook Dutch interest | Ask; prefer non-Dutch |
| Wing the exit | Plan sell or refi-to-DSCR upfront |
Fix & flip mistake FAQs
Most common mistake?
Inflating the ARV — it shrinks your loan at underwriting and erases margin. Use conservative comps.
Do investors underbudget rehab?
Often — use contractor bids and a 15–20% contingency, not rough estimates.
Is ignoring holding costs a mistake?
Yes — carry accrues monthly; a delay can erase the profit. Budget a realistic timeline + reserves.
Take the first quote?
No — compare total cost over your hold and check Dutch vs non-Dutch interest.
Reviewed by the licensing team at Save Financial, a California-licensed mortgage brokerage (NMLS #377740, DRE #01875766) founded in 2009 and serving all 58 counties from offices in Newport Beach and Marina del Rey.