Fix-and-Flip Investors: How Do You Protect Against Market Shifts Mid-Project?

Question

If the market cools while you’re holding a flip, do you adjust your exit strategy, lower your ARV expectations, or just ride it out?

Chris Seveney · Answer

conservative underwriting. far too often people underwrite to make numbers look the way they want or leave no cushion. They plan for best case which never happens. When you plan your budgets the same as if you plan to drive to work in a major city at 9 am on a monday as if it was 9 am on a sunday, you will lose, and lose everytime.

Scott Chilton · Answer

Drago, when the market cools while you are holding a flip, the smartest move is usually to adjust early rather than wait and hope things swing back quickly. Lowering your ARV expectations upfront helps you stay realistic and avoids sitting on a property too long with holding costs eating away at your profit. Some investors also shift their exit by turning the flip into a rental if the numbers still make sense, which can buy time until the market improves. By being flexible with your strategy, you protect your capital and keep yourself in the game for the next deal.

Andy Sabisch · Answer

That is what I mentioned in my earlier post.  Being conservative in the ARV and over estimate reno costs will give you a buffer especially if the project takes longer than expected and the market continues to soften.  Dropping prices tends to show desperation to buyers which encourage them to come in even lower or wonder why it has not sold.  There is a saying that every house has its price - the trick is to make sure you hit it out of the gate so you get a quick sale and move on.  We would rather leave some on the table and get a quick close that hope for more and sit on it

Kevin Ivey · Answer

We try to keep our numbers conservative and move fast!  We have seen the cooling and tried to budget for the lower ARV and are doing a lighter rehab.  Skipping the high end finishes and working to keep the property more "affordable" so we can be on the lower end of the market and still make money.

I work mainly in foreclosure auctions so a lot of unknowns and in the Seattle area market it is extremely hard to pivot exit strategies as rent to price ratios are so bad.   We would end up with all our working capital sitting in the rental to get it to cash flow.

Kay Sam · Answer

I recently ran into this issue with a cooling market. Although I didn't know it was cooling as I entered,  my realtor had suggested a lower list price initially. Then mid deal I found out I needed to keep DROPPING the price. So now moving forward,  I'll ensure I go in with a conservative ARV number & work backwards like others have mentioned.

Even if the exit strategy is rental, sometimes that # doesn't work either from what I've seen thus far.

Scott Allen · Answer

@Drago Stanimirovic When I'm looking at flips to do, I also analyze them as brrrr's in the event I need to hold the property. The main issue I usually run into with single-family's is they don't usually cashflow well but there is a higher chance the tenant will stay much longer. For ARV - I am usually looking at similar comps that closed more recently (3-6 months) that will still be comps for the subject property when selling or doing a refi.

Shaza Atassi · Answer

If the market cools mid-flip, I tighten my ARV comps and price more aggressively to move it faster. If the numbers don’t pencil out, I pivot to a rental or creative financing exit—never just ride it out and bleed holding costs.

Andy Sabisch · Answer

With the shift to a Buyers market, we plan on a lower ARV at the end and make sure the numbers work when we start.  There have been several members here recently that assumed the ARV would hold or go up and found out the market shifted and their profit was vanishing.  If the property was bought right, shifting to mid term or long term rental is an option but it has to cash flow for us to consider that as an option.  In many areas the rental market has also cooled off.  The STR market is a killer with over saturation and many areas enacting restrictions so we never even look at that as an option.  Refinancing if HM was used is something that should be considered at the start and activated before the HML terms increase.

As I and others have said before, make sure you have a solid contingency built in to the project before you start, be realistic with the reno and ARV amounts and have more than one exit strategy in case things have shifted.

Fix-and-Flip Investors: How Do You Protect Against Market Shifts Mid-Project?

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