July 28, 2025 | 2 Minute Read
We currently have multiple properties under contract, and as is often the case, some take longer to close than others. One example is a deal we’ve had under contract since April 28. The closing has been delayed twice—not because of financing, but because the seller failed to pay property taxes.
In Jefferson County, Alabama, it took nearly a month just to receive the official tax redemption amount due to notoriously slow updates to county records. In fact, we still have properties we bought years ago that are listed under the previous owners.
This particular property is a 4 bed, 2 bath house we locked up at $80,000. It needs roughly $25,000 in renovations, putting our total investment at $105,000. When we initially ran comps, the ARV (After Repair Value) looked solid at $165,000, based on sales from six months prior ranging from $180,000 to $202,500. That gave us a 69.5% loan-to-value (LTV) ratio—comfortably under our 75% max threshold.
Why 75% LTV? Simple: hard money lenders and rental refinance lenders cap their loans at 75%. If we go above that, we either can’t get funding or we have to leave more of our own money in the deal.
At the time, this looked like a great deal. We had two solid options:
Flip it for a projected $35,000 profit, or
Hold it as a rental, which would bring in $1,500/month, yielding a 12.83% cap rate, $378.27 monthly cash flow, and a DSCR (Debt-Service Coverage Ratio) of 1.45.
That was then—this is now.
The tax redemption amount finally came in, and the seller has agreed to pay it at closing, now scheduled for August 11. But because three months have passed, I ran updated comps. Since July 25, the new sales data shows a drop in values, with similar homes now selling between $130,000 and $145,000.
That’s a $20,000 drop in ARV assuming a $145,000 value, which pushes our LTV up to 79%. Our flip profit shrinks to just $15,000.
So now, what are my options?
Move forward at the current price, but if I refinance, that extra 4% LTV means I’d have to leave $6,500 of my own money in the deal.
Renegotiate the purchase price down to $74,500, which keeps us right at the 75% LTV threshold and allows a 100% refinance with none of our cash tied up in the loan.
Cancel the contract, walking away from the deal and forfeiting the $500 earnest money.
This deal is a perfect reminder that delays can eat into your margins—and market shifts don’t wait for your closing date. Whether you renegotiate, refinance, or walk away, the key is to stick with your numbers and your exit strategies. The numbers don’t lie, no matter how many times you run different scenarios.
My plan is to renegotiate the price this week. Stay tuned to see how this one turns out in a future update.