How Interest Rates Will Impact Fix and Flips in 2025
Categories: Blog Posts
Today we are going to discuss how interest rates will impact fix and flips in 2025! Let’s dive into what this means for you and how to set yourself up for success.
Why Timing and Funding Matter
Timing is everything in real estate. Selling at the right time, like early spring or late summer, can maximize your profits. Missing these windows? That can add months of carrying costs, extra stress, and potentially reduced profits.
But timing isn’t the only factor—your funding strategy plays a huge role. Having the right money bucket ensures you’re ready for surprises without slowing down your project.
What Happens Without Proper Funding?
One of the most common mistakes we see is when investors aren’t money ready. Let’s look at an example:
- Investor A had everything planned. The property was supposed to take 6 months from start to sale. But halfway through, they found $7,500 in unexpected repairs—old wiring and copper plumbing. Since they didn’t have enough reserves, they scrambled for funds.
- This caused delays. Subcontractors moved on to other jobs, pushing the project back 4-6 weeks. By the time Investor A finished, they were 4 months behind and had to pay $12,000 in extra carrying costs. On top of that, they had to drop the price by 5%, losing $20,000.
- In the end, their $60,000 profit shrank to just $15,000—and their stress levels went through the roof!
The Tale of Two Investors
Let’s compare Investor A with someone who was prepared.
- Investor B also faced the $7,500 surprise but had their funding ready. They covered the cost immediately, keeping their project on schedule.
- Investor B finished in 5 months, saving an extra month of holding costs. Despite the unexpected expense, they still walked away with $55,000 in profit.
What’s the difference? Speed and preparation. Being money ready made all the difference for Investor B.
How Interest Rates Will Impact Your Deals in 2025
Higher rates increase borrowing costs, so every delay becomes even more expensive. Here’s why:
- Larger Monthly Payments: Each month you hold the property costs more. Taxes, insurance, and interest can eat into profits fast.
- Extension Fees: Lenders often charge hefty fees if your project goes past its original term. For example, a 2% extension on a $250,000 loan adds $5,000 in unexpected costs.
- Price Adjustments: Slower markets due to higher rates may force you to drop prices to sell quickly.
Steps to Succeed in 2025
- Build Your Money Bucket: Plan to have 20-40% of your total budget in accessible funds. This includes reserves for unexpected costs, payments, and project overruns.
- Stick to a Fast Schedule: The faster you complete your project, the less you’ll spend on carrying costs.
- Partner with Reliable Lenders: Work with lenders who understand the challenges of fix-and-flip investing.
Get Help So You Don’t Make This Mistake
2025 will bring challenges for fix-and-flip investors, but preparation is key. Want help setting up your money buckets or finding the right funding options? Reach out to us!
Let’s ensure you’re ready to profit faster, stress less, and enjoy real estate investing in the coming year.
Wrap-Up
Speed and preparation are your best friends in a fix-and-flip project, especially when interest rates are high. The more prepared you are, the more successful you’ll be.
If you have questions or want to learn more, contact us today and check out our programs. We’re here to help you thrive in 2025 and beyond!
Watch our most recent video to find out more about: How Interest Rates Will Impact Fix and Flips in 2025!
