How much cash should a flipper keep in reserve

[Nicholas Floyd]

One mistake I see investors make is putting almost every available dollar into the purchase and renovation.

Even when the numbers on a flip look great, cash can get tight quickly when you add holding costs, contractor overruns, material increases, inspection issues, or a property taking longer than expected to sell.

That’s why I think funding should be looked at as more than just “How do I buy the property?”

A stronger approach is figuring out:

• How much cash you’ll need at closing

• How the rehab will be funded

• What your monthly carrying costs will be

• How much reserve capital you’ll still have afterward

• Whether you have access to additional business capital if something unexpected comes up

Sometimes keeping more cash in reserve and using financing strategically can put an investor in a much stronger position than draining their available capital just to get the deal closed.

For the experienced flippers here — how many months of reserves do you normally like to have available before starting a project?