Updated: May 6, 2019
Don't let a severely distressed property scare you. My favorite homes to work on are those where the ceiling is collapsing from water damage and half the drywall is missing. Why? Because these are the easiest to scope out.
Some of the most costly repairs in a home revolve around plumbing and electrical. Unfortunately, these items are mostly hidden in the walls. Inside the walls and under the foundation are where 99% of your unknowns are. If the home is down to the studs, you've just eliminated most of those unknowns and lowered your risk. You now know what you are getting into.
The first property I flipped was a fire damaged property in Duncanville, Texas. The second story subfloor had a 15' hole directly in the middle of it. The furnace upstairs caught fire, but luckily the fire was put out before damaging the roof or exterior walls. I was forced to learn about every aspect of the house. The flip required architectural renderings to obtain permits, brand new plumbing, electrical and HVAC. We also rebuilt load bearing walls with new beams to create an open concept.
To this day, every property I have worked on has been easy because I was forced to work on such a difficult one for my first flip. Don't be scared to take on those projects that "look" daunting. They really aren't. Figure out what's damaged and repair it, it's not that hard. Make sure you have experienced subcontractors. Their knowledge and expertise will help you gain confidence in the early days when you are doing your first couple flips.