Are Flips Still Penciling in This Rate Environment?

Question

I've got a few flip investors I work with who are being a lot more conservative on their numbers lately — holding costs add up fast with rates where they are, and exit prices aren't always cooperating. Still seeing solid margins on the right deals, but the room for error feels smaller than it used to be. Anyone else flipping right now — how are you adjusting your underwriting to account for longer hold times or softer resale prices?

Chris Seveney · Answer

Rate-a for flippers are lower than the were 10 years ago so answer is yes

Andrew Postell · Answer

@Jack Shields yeah, when things get challenging, a lot of 'investors' leave the industry. It certainly can be difficult to calculate your value...when values are decreasing, or taking longer to sell, etc. When times are great (remember those 2021 & 2022 times when all the prices were increasing?), the increase in value can hide poor math. When times are "normal" or "tough", your mistakes are under the spotlight, and they can lead to big losses. Absolutely pay attention to "days on market" and "median home price" trends. Your local realtor association publishes these numbers (and others) normally. I attached one here for reference. Be curious about the industry and know how to interpret these figures. That will allow you to remain profitable for the long term.

Bruce Woodruff · Answer

Flips 'can' always pencil....but it depends on so much.....what type of property? Where is it? How much work does it need? How quickly can the work be done?

The 2 most important question are always: 1) What is the rehab budget? 2) What is the ARV?

If these are accurate and work on your spreadsheet....(big if's) then any deal will work.

Are Flips Still Penciling in This Rate Environment?

3 Replies