Why More Investors Are Building “Plan B” Into Every Deal

Question

A few years ago, investors could rely heavily on appreciation and easy exits, Now? The smart investors are building backup plans into every deal.

Flip doesn’t sell? Rent it.

Refi doesn’t hit target? Hold longer.

That flexibility is saving a lot of deals right now. Do you underwrite with multiple exits now?

Mike Klarman · Answer

The key to not being stuck in a project is to buy at a steep discount.  If I can buy a house for 60k and another investor buys the same house for 100k on market, that savings right in step 1 of the BRRRR is the game.

James Jones · Answer

If you’re not underwriting with multiple exits right now, you’re gambling.

Market cycles don’t care about your pro forma.

Every deal we look at has at least two viable paths:

Flip

Rent and stabilize

Long-term hold with conservative refi assumptions

If the flip only works with perfect timing and top-of-market pricing, it’s not a deal.

If the refi only works at yesterday’s rates, it’s not a deal.

Plan B isn’t optional anymore.

It’s the filter.

The question I ask now is:

If appreciation stalls for 24 months, does this asset survive?

If the answer is no, we pass.

Flexibility equals durability.

Durability equals scale.

Stacy Raskin · Answer

Good points. I'm hearing more investors who instead of selling, are converting their fix and flip into a rental with a DSCR loan. They use a DSCR loan as the loan product has a shorter seasoning period which allows investor to get their cash out of the deal more quickly. The investors who have decided to rent the property are usually deciding to convert it to a rental as they aren't getting the price they had planned for the property.

J Castro · Answer

@Frankie Vozzi, great post.Absolutely. From one lender to another, we’ve found that “Plan B” has become a critical part of prudent underwriting.

A few years ago, many investors relied on rapid appreciation and quick dispositions to make the numbers work. In today’s market, many lenders want to know what happens if the original exit takes longer or doesn’t produce the expected results.

If a fix-and-flip property doesn’t sell as quickly as projected, can it be converted into a cash-flowing rental? If the refinance proceeds come in lower than anticipated, does the borrower have the liquidity and reserves to hold the asset longer?

When a deal supports multiple viable exits, it reduces risk for both the borrower and the lender. It also demonstrates that the investor is approaching the opportunity with discipline rather than relying on a single optimistic outcome.

In the current environment, the most resilient deals are those with built-in flexibility. Optionality is no longer just a bonus—it is an essential part of sound underwriting.