The Fix-and-Flip Fallout: What We're Seeing in the Private Lending Market

[Chris Seveney]

Over the past few years, I’ve been vocal about the rise of inexperienced fix-and-flippers jumping into real estate with little more than YouTube tutorials and optimism.

Now? The cracks are showing.

In just the past week alone, I’ve seen loan pools totaling over $200 million in defaults cross my desk. These aren’t isolated deals—they’re systemic. And the brokers I’ve spoken to are saying it’s just the beginning. We also have heard rumbling KIavi is moving out of Florida (Ironically more than 50% of these loans are in Florida with heavy concentration in Tampa /  Port Charlotte area)

Most of these loans are tied to rehab projects that were either under-budgeted, mismanaged, or never should've been funded in the first place. Rising rates, labor shortages, and inflated ARV projections have pushed a lot of these deals underwater.

It begs the question:

Is real estate finally going back to being a complex business again?

For the past few years, it felt like anyone could throw money at a deal and come out ahead. Now, it’s becoming clear that experience, underwriting, and risk management matter again.

If you're a lender—have you started tightening your standards? Or seen others doing the same?

Would love to hear what others are seeing out there.

[Jay Hinrichs]

Rates have hurt flippers and those that provide used houses for turnkey marketing companies that operate generally out of LA.

So we have seen a slow down in that area.. So what some of my BRRR folks that were or are flippers by trade are now building their own portfolios and are refinancing to take out our bRRRR loans.. instead of flipping.

Although I have clients that are flipping successfully in certain markets and I personally wont fund anything in FLA or TX . And my niche is the starter house market.. We are still seeing flips as long as the homes are in decent areas super clean rehab and starter homes that even with rates today payments are equal or less than rent..

we have some honey holes that are doing quite well actually but I dont publicize those as I dont want to create competition for my clients :).. They worked hard to find these areas establish their teams and then with our capital they are doing quite well.

FLA is a FOMO and boom bust market same with parts of TX  from what I have seen since I was first introduced to both in the mid 80s.. I built some houses north of Orlando we got out of them but just made small profits but at least we did not get stuck like the hundreds of clients that flocked to SWF  I have seen that market melt down in the past so there was no way we were going there.  And I am sure it was mainly me but we just have not had good experiences in Texas flippng either I have not done new builds but flipping there was/is a challenge with appraisals and foundations and PROPERTY TAXES Then you throw in a good hail storm :)