The #1 reason fix & flip loans get denied (it’s not credit)

[Seph Hancock]

Most investors think fix & flip loans get denied because of credit. In reality, that’s usually not the biggest issue. The #1 reason I see deals fall apart is unrealistic rehab numbers. A property might look profitable on paper, but if the renovation budget is too light — or the scope of work doesn’t match the timeline — lenders immediately start questioning the deal. A few common problems: • Rehab budgets based on “best case” pricing • No contingency reserves for surprises • New investors trying to take on heavy rehabs too early • Weak or unclear exit strategies • ARVs that don’t match local comps • Contractors without verified bids or timelines Experience matters too. A first-time flipper doing cosmetic updates is one thing. A first-time flipper trying to gut a 1960s property with structural issues is a completely different risk profile. Right now, lenders are scrutinizing execution more than ever. The investors getting funded consistently are the ones who present: ✔ Clean numbers ✔ Strong comps ✔ Realistic rehab plans ✔ A clear exit strategy Curious what everyone is seeing in today’s market: Are you running into more problems with funding… or finding good deals?

[Denise Webster]

I agree with this. Credit matters, but weak rehab numbers and unclear execution plans can kill an otherwise fundable fix-and-flip request.

The biggest issue I see is that investors sometimes present a deal as if the lender is only reviewing purchase price, rehab, and ARV. In reality, the lender is also underwriting the borrower's ability to execute the plan.

A rehab budget that is too light creates several questions:

• Was the property walked by a qualified contractor?
• Are major systems accounted for?
• Is there a contingency reserve?
• Does the timeline match the scope?
• Are permits required?
• Are labor/material assumptions current?
• Does the exit still work if ARV comes in lower?

Your point about ARVs not matching local comps is especially important. A deal can look profitable on paper because the ARV is optimistic, but if the lender's valuation or the buyer's appraisal comes in lower, the whole capital stack can get squeezed.

For investors trying to improve funding odds, I’d suggest packaging the deal like this before shopping lenders:

• Purchase contract
• Scope of work
• Contractor bid
• Rehab budget with contingency
• Before photos
• Sales comps
• ARV explanation
• Timeline
• Borrower experience summary
• Liquidity/reserves
• Exit plan
• Backup exit if sale or refinance takes longer

The best flip packages make the lender’s risk easier to understand. The weaker ones force the lender to guess, and lenders usually price uncertainty poorly or decline the deal altogether.