The Biggest Reason Flip Deals Are Falling Apart Right Now

[Frankie Vozzi]

I’m seeing flip deals struggle this year, and honestly it’s not usually the rehab.

The biggest issue:
Exit assumptions

What’s changing:

• Longer days on market
• Buyers becoming more payment-sensitive
• Aggressive ARVs getting exposed

The flips still working:

• Conservative resale pricing
• Faster timelines
• Backup plan if resale slows

Are you adjusting your flip criteria this year?

[Ryan Thomson]

The exits are what's killing them.

Flippers penciled deals based on buyers who could afford 6% rates. Those buyers are still out there, but at 6.8-7%+ they can afford 10-15% less house. So your ARV target has shifted down, but you're still competing to buy distressed properties against wholesalers and other flippers who haven't adjusted their models yet.

On top of that, hard money is running 10-12% right now. A $300K loan at 11% costs roughly $2,750/month just in interest. Add insurance, taxes, and utilities and you're burning $3,500+/month while the house sits. Every 30 days of market time eats another $3-4K off your profit.

The math that used to work doesn't anymore. 70% of ARV minus repairs assumed you could sell at ARV. But if your buyer pool has shrunk because fewer people qualify at today's rates, you're either cutting price or sitting longer. Both hurt.

One play worth underwriting: if the distressed property has an existing FHA or VA loan with a sub-4% rate and you can structure the deal to preserve it, your end buyer can assume that mortgage instead of financing at 7%. That changes their monthly payment by $800-1,000/month and suddenly the ARV you need is achievable. It's a niche play, but it comes up more than people realize.

Otherwise the answer is just: buy deeper. The market has adjusted, and deals that made sense at 80% of ARV need to be at 65% now to account for longer hold times and compressed exit prices. The formula hasn't changed, just the inputs.