You budgeted for the purchase and rehab—but what if the finished property sits longer than expected?
Loan payments, utilities, insurance, and taxes keep coming even after the contractors leave.
Before taking on a deal, ask yourself: • How much would three extra months cost? • Would that leave enough cash for my next project? • Could I repay any additional funding if the sale gets delayed?
At 850Floyd Financial, I help investors explore business credit and funding options so they can plan ahead for those gaps. Any borrowing still needs to fit the deal’s numbers and repayment plan.
Do you build extra holding time into every deal, or adjust your cushion based on the property?
Thank you for asking a thought provoking question to our community. After doing over 100 fix and flip/ buy and holds and the reserve is a moving target. I try to set back 6 months of holding cost. if it doesn't work then get a better deal. Thank you for contributing to our community .
Good question, Nicholas. I build holding time into every deal, but I size it to the property instead of using one flat cushion. Before I buy, I figure the monthly carry: loan payment, taxes, insurance, utilities, lawn or snow, and vacant-property coverage if the policy needs it. Then I multiply that by three to six extra months, depending on how fast that price point and ZIP actually sell right now. If the deal only works when the house sells in 30 days, it doesn't work. Two other things help. I keep a second exit, so I can rent the house out if it sits, and I check that the rent would cover a refinance before I buy. And price reductions usually cost more than a few extra months of carry, so I'd rather price it right on day one than chase the market down. On extra funding, my rule is that borrowed money can cover a delay you planned for, but it shouldn't be what saves a deal that only worked on a fast sale. BJ Everson, Realtor with Swis
Nicholas, I build holding time into the all-in before I buy, not after the rehab is done. I do not flip to sell, I buy, rehab, rent, and refinance, so my holding cost after rehab is covered by rent. But the math is the same: loan payments, utilities, insurance, and taxes keep coming whether the house sells or not. I price the deal on the all-in: purchase plus rehab plus holding cost. Then I check it two ways. First, the 1% rule: for a 3-bedroom or larger on Section 8, I need rent of $1,395 to $1,950. Second, the refi: will it work on a DSCR loan at 70 to 80% loan-to-value? If three extra months breaks either check, the purchase price was too high. How many months of holding cost do you have in your all-in right now?
Nicholas, this is one of those costs that surprises first-time flippers more than the rehab itself — the house is done, but the loan, taxes, insurance, and utilities don't stop just because the contractors left. I build extra holding time into every deal, and I size it to the property and the price point: check the days on market for comparable finished homes in that neighborhood, not just the average, and price out the monthly carrying costs line by line. The test I use is simple — if three extra months would eat the profit or leave me unable to fund the next deal, the purchase price was too high, not the cushion too small. And like BJ said, having a second exit, like renting it out, takes a lot of pressure off the sale timeline.
I figure carry as a monthly number before I make an offer. On a $200K ARV flip with $140K borrowed at 11%, that's about $1,280 interest, $350 taxes, $120 insurance and $200 utilities and lawn, so roughly $1,950 a month. Three extra months is about $5,850, and I underwrite six months, around $11,700. If MAO is ARV x 70% minus repairs minus my fee, that cushion has to fit inside the 30% margin. If the deal only works with a 30-day sale, I pass.
One way to make this concrete is to turn holding costs into a daily number before you buy.
Example: $230K total loan at 11.5% = about $72/day in interest. Add taxes ($3,600/yr), insurance ($2,400/yr) and utilities ($400/mo) and you're near $102/day. Three extra months is about $9,300, which on a $25K projected profit is more than a third of it.
Two things people miss:
If your lender charges interest on the full loan including the undrawn rehab holdback (Dutch interest), the daily cost doesn't drop as you draw, so slow draws hurt more.
Check your maturity date against your realistic payoff date, not your planned list date. A 1% extension fee on a $230K loan is $2,300 on top of the holding cost.
A simple rule: size the cushion per deal from that daily number, as the days of slack you can afford before profit drops below what the deal is worth to you.