Home renovation and flipping shows on TV highlight some of the challenges of completing these types of projects, but until you have done one yourself, you don’t really know what's in store. Although you should always prepare for surprises when flipping a home, the more research you do, the better prepared you will be for the unknown. Understanding the potential challenges that might arise will also serve you well when pursuing fix-and-flip loans.
Here are pro tips to avoid some of the most common pitfalls of fix-and-flip projects.
Renovations are guaranteed to come with surprises. Always conduct a professional inspection and budget for hidden issues. You never know what’s hiding behind the walls of a home, so be prepared to encounter:
Budgeting for unexpected fix-and-flip costs can help keep a project on track, even when those curveballs keep coming.
Even the most experienced flippers will face unexpected expenses. Add a buffer to your budget so you have extra funds to use while still making a profit on the flip. If you don’t have to use these funds, it’s just a bonus.
Projects almost always go over budget, not under, so make sure you have sufficient funds on hand to cover overages if they occur. Many fix-and-flip investors plan on a 10-20 percent financial contingency to protect their profits.
Factor in non-negotiable delays. In addition to costing more than initially budgeted, many fix-and-flip projects also take longer than expected, even with an experienced contractor. Plan on extra time for the various challenges out of your control, such as:
Be ready to pivot your strategy to adapt to changing market conditions. The renovation landscape is in constant fluctuation, including changes in interest rates and access to labor. What was a good value when you purchased the home could change by the time you’re ready to sell it.
Depending on the situation, some of your options might include:
Every unexpected cost eats into your potential profit. Have a solid understanding of all your costs and the financial impact of every decision you make. This includes decisions that will delay the timeline, as every month you delay means another month of loan payments, resulting in a further reduction in potential profit.
Even if you have great credit and a solid history of paying down debt, you might not be able to get a fix-and-flip loan from a conventional lender. Much of the time, the reasons why conventional banks deny fix-and-flip loans have nothing to do with your relationship with the lender but rather the limitations on the types of loans they can finance. Other factors, such as the condition of the property, also play a role, and fix-and-flip projects don’t always meet the criteria for conventional lenders.
Moving quickly to lock down a fix-and-flip opportunity requires fast access to financing. If you have bad credit or difficulty providing proof of income through tax returns, getting a conventional loan can be challenging, not to mention slow. Fortunately, you have options.
When traditional lenders won't fund the project due to the property condition or borrower profile, hard money lenders can provide the necessary equity-based financing. Because the loan is based on equity, if you own property, you can likely access funding for your fix-and-flip project. Plus, you get the bonus of being able to move faster than the competition.
Socotra Capital offers flexible rehab loans to fund your fix-and-flip project. As a direct lender, we service our loans from start to finish and work with borrowers to ensure their projects are successful.
To learn more about how to get financing for your next flip, read https://www.socotracapital.com/the-borrowers-guide-fix-and-flip-hard-money-loans today.
This blog was originally published February 2022 and updated October 2025