What’s your backup plan when your flip goes over budget?

[Nicholas Floyd]

A flip can have a solid purchase price, a realistic rehab budget, and a strong projected profit, but unexpected expenses can still put pressure on the deal.

A contractor finds an issue behind the walls. Materials cost more than expected. The project takes an extra month. Suddenly, the capital that was supposed to carry the project to completion is running low.

That’s why I believe having a funding strategy is just as important as finding the right deal.

Depending on the investor’s qualifications and business structure, business lines of credit, 0% introductory APR business credit cards, business loans, or revenue-based funding may provide additional capital for rehab expenses, holding costs, or future opportunities. The key is understanding the terms and having a repayment strategy before using the funds.

For the experienced flippers here, what’s your go-to backup plan when a rehab goes over budget: cash reserves, a line of credit, additional financing, or something else?