What’s Your Backup Plan If Your Flip Doesn’t Sell as Fast as Expected?

Question

A lot of investors run the numbers based on everything going according to plan.

But what happens if the property sits on the market longer than expected?

Before getting into a flip, I think it’s important to know your backup strategy. Maybe that means adjusting the price, refinancing, renting temporarily, or simply having enough capital available to handle additional holding costs.

The financing side matters too. Using all of your available cash just to get into the deal can leave you with very little flexibility if something changes.

That’s one reason I talk so much about having access to business funding and additional capital before you actually need it.

Of course, every deal is different. Do your own due diligence on the numbers and only leverage what you can realistically afford to repay.

For the experienced flippers here: what’s your backup plan when a property takes longer to sell than expected?

Erik Estrada · Answer

Following.

Great topic post!

Michael K Gallagher · Answer

if you are in flipping you better have a plan B, C, D and E before you even offer on the deal initially. sure you can rent if it doesn't go well as a flip, but maybe just selling at a loss and getting out and moving on is preferred, the backup plan really depends on the operator and what they are trying to get out of the project. but to your point if you don't look at these backups as options and evaluate them prior to getting into the deal then they might not really be options for that deal.

Brook Janis · Answer

I completely agree with this. I’ve seen how quickly a flip can get stressful when the timeline doesn’t go as planned, so I always tell investors to think about their backup plan before they even get into the deal.

Personally, I like having a few different options on the table—sell, refinance into a DSCR loan and hold it, or have enough reserves to cover the extra holding costs if it takes longer to sell. The goal is to make sure you’re not forced into a decision just because the property didn’t sell as quickly as you expected.

That’s also a big part of what I do on the lending side. I like looking at the whole deal with the investor upfront and figuring out what options they have if Plan A doesn’t work out.

Kasing Ng · Answer

Hi Nicholas, great question. The one I would add is on the tax side of "rent it for a while and sell later."

People assume that once they rent it, the sale becomes a long term capital gain. It does not work that way on its own. If you bought the place to flip it, the IRS can still call you a dealer when you sell, and dealer profit gets taxed as ordinary income with self employment tax on top, not at the lower capital gains rate. Renting it a few months to wait out a slow market usually is not enough to change that. What matters is why you bought it, not how long you end up holding it.

If you genuinely convert it and run it as a rental for real, over a longer hold that can change. But the short "rent it to buy time" version often leaves you taxed like a flip anyway, so it is worth pricing in when you build the backup plan.

What’s Your Backup Plan If Your Flip Doesn’t Sell as Fast as Expected?

What’s Your Backup Plan If Your Flip Doesn’t Sell as Fast as Expected?

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