What Financing Mistakes Have Hurt Flip Margins the Most?

Question

Looking back on past flips, what financing-related decisions impacted profitability the most? Speed, leverage, or exit assumptions?

Peter Mckernan · Answer

The biggest one these days are holding times... This is blowing everyone's margins out of the water due to long DOM. The DOM and the changing market (more inventory) are increasing people's expenses drastically which is putting people into a rock and a hard place.

Watch the inventory and the DOM for that area you are flipping, and it is always good to go under then it is to go over/at market price.

Scott Chilton · Answer

From what I have seen and lived through, speed usually has the biggest impact on profit. The faster you can buy, fix, and sell, the less you pay in interest, holding costs, and stress. Even a great deal can turn average if it sits too long because the money clock never stops.

Leverage matters too, but too much debt can shrink your margin fast if the timeline slips. Cheap money looks good on paper, but slow approvals or missed draws can cost more than a slightly higher rate that closes clean and on time.

Exit assumptions are the quiet risk. If you stretch the resale price to make the numbers work, financing will not save the deal. Conservative exits and reliable funding give you room to breathe and protect your profit when something goes sideways.

Greg Kasmer · Answer

In addition to DOM going up I'm seeing values decrease/stabilize in certain pockets. So, properties are sitting longer for a lower value, making it very difficult!

Doug Clark · Answer

I’ve seen margins get hurt the most when rehab timelines and days on market are underestimated. When projects run longer than expected or properties sit just a little longer, financing costs quietly add up and eat into profits fast.

Those extra months of interest, taxes, insurance, and utilities don’t seem like much individually, but together they can make a solid flip feel tight. Building in realistic timelines (and some buffer) has made a big difference.

Andy Sabisch · Answer

Using a HML and as Bo said, failing to hope for the best and plan for the worst. When the HML loan comes due, profits sail out the window if you are still working on it or the market has changed.

Having a REALISTIC timeline and then add in grace to take care of unexpected issues which almost always come up can avoid those expensive lessons.

Bo Smith · Answer

Honestly, exit assumptions killed me more than anything else. I'd get fixated on my ARV comp and ignore days on market trends for that specific neighborhood. One flip sat for 4 months because I priced it like comps that sold in 30 days, but that area was averaging 90+ days. Now I always factor in realistic holding costs for the actual market pace. Do you build in extra months of carrying costs or go with best-case scenarios?

What Financing Mistakes Have Hurt Flip Margins the Most?

What Financing Mistakes Have Hurt Flip Margins the Most?

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