How To Salvage A Failed Flip?

Flipping houses can be a potentially lucrative venture, however, sometimes things don't go as planned. If your flip doesn't sell as quickly or is not as profitable as you anticipated, there are steps you can take to turn the situation around and increase your chances of a positive outcome. Let's dive in what to do when your flip doesn't sell.

Assess The Situation - Why Isn't Your Flip Selling?

Market Conditions

The market is constantly fluctuating and that can impact the saleability of your flip. Research current market trends, average days on market, and analyze comparable properties to gain insight into the overall market conditions.

Marketing / Exposure

If buyers aren't aware of your property for sale, it's unlikely you'll get an offer. Review your Realtors marketing efforts and ensure your property is listed accurately on all real estate websites such as Zillow, Realtor, Trulia, Etc - and of course the local MLS.

Pricing

One of the most critical factors in selling a property is pricing it correctly. Reevaluate your asking price and make sure it aligns with comparable sales in the market. If your flip is overpriced, it may deter potential buyers who can find similar properties at more competitive prices. .

Alternative To Selling Your Flip

A "Plan B" to a flip not selling is to simply rent it out instead of taking a loss or less profits that wasn't worth your time. Use the BRRRR (Buy, Renovate, Rent, Refinance, Repeat) method to salvage the deal. A good strategy when flipping properties is to find a property that would make sense as a rental if the flip doesn't go as planned. For instance, if you bought a property for $200,000 and spent $50,000 on renovations and it doesn't end up selling at a price point where there is a healthy profit, could you rent it out for $2,000/mo and achieve a desirable CAP Rate on it? Let's run the numbers - $24,000 Annual Gross Income minus roughly 20% for expenses (Property Tax/Insurance/Maintenance) brings you to roughly a $19,200 NOI. Divide $19,200 into $250,000 to get to a 7.6% CAP Rate. Most investors would be content with a 7.6% CAP Rate. Assuming you are satisfied with that return, perform a cash out refinance and repeat the process. Although, not every failed flip makes sense as rental, it's important to run through the all the scenarios and numbers before hand just in case you're faced with a "Plan B" situation.