Why Fix & Flip Projects Fail Before the Sale (And How to Avoid It)
Fix and flip projects are fast-moving, capital-intensive, and full of variables. Most investors spend significant time sourcing deals, securing financing, and planning renovations — but far fewer account for the operational risks that can derail the project before it's ever listed.
From stolen materials to storm damage, the most costly delays often happen during construction, not after. As a lender working closely with real estate investors across the U.S., HMMB Funder has seen this pattern repeat across markets, budgets, and experience levels.
This article explores the most common risks that impact fix & flip projects during the renovation phase, and how responsible planning — including proper insurance coverage — helps protect both the property and the capital behind it.
The Most Overlooked Phase of Risk: Construction
Once a property is acquired, the clock starts ticking.
Renovation budgets, labor timelines, and market exit strategies are all tightly coordinated. But this is also when the project becomes most vulnerable. At this stage, the property is typically:
Vacant, increasing the risk of vandalism or theft
Partially completed, meaning unfinished roofing, exposed wiring, or compromised access points
Uncovered by standard insurance, as many property policies exclude vacant buildings or active construction sites
Even a relatively minor issue — like a delay in permitting, or materials stolen from an open job site — can cause a cascading effect that delays draws, increases holding costs, and jeopardizes exit plans.
What’s at Stake Without Proper Coverage
Most investors assume that a homeowners policy or dwelling insurance is enough to protect their project. But these policies almost always exclude coverage for properties under renovation, especially if the property is unoccupied.
Without dedicated protection, investors are exposed to a wide range of real risks, including:
Fire damage during HVAC or electrical work
Storm damage to exposed roofing or foundations
Theft of appliances, fixtures, or lumber
Vandalism of unsecured properties
Jobsite injuries or third-party claims during construction
In worst-case scenarios, a project delay caused by a single incident can trigger loan default clauses, force a rushed sale, or require the investor to bring in additional capital.
The Role of Builder’s Risk Insurance
Builder’s Risk Insurance is designed to cover the construction phase of a project — from the day demolition starts until the day the property is sold or reoccupied.
This type of policy typically includes protection for:
The physical structure under renovation
Materials and equipment stored on-site or in transit
Damage caused by fire, theft, vandalism, wind, hail, or collapse
Soft costs such as permits, engineering fees, and loan interest, if added
Some lenders require Builder’s Risk Insurance. Others recommend it as a best practice. In either case, the intent is clear: protect the value of the asset — and the capital behind it — during the most unpredictable stage of the deal.
At HMMB Funder, Builder’s Risk coverage is part of a broader conversation about smart project planning. For investors who need tailored commercial coverage, we refer clients to Starisks Insurance, a provider known for working with real estate investors, developers, and builders nationwide.
Structuring for Success
A successful flip doesn’t come down to financing alone. It’s about building a structure that can withstand the unexpected — from market shifts to physical damage.
At HMMB Funder, fix & flip loans are structured with the full project lifecycle in mind:
Acquisition speed to help investors close quickly on competitive deals
Flexible draw schedules to support phased renovations
Asset-first underwriting, evaluating the deal, not just the credit
Guidance on project risks, including insurance and contingency planning
Final Thoughts
The most experienced investors treat risk as something to manage — not avoid. They build with buffers, insure the in-between phases, and work with lenders who understand that real estate investing is rarely clean or linear.
If you’re planning your next flip, think beyond purchase price and resale value. Think about what could go wrong in the middle — and build your deal structure to absorb it.
Funding is only part of the equation. Execution is everything.
Ready to fund your next project with confidence?
Talk to HMMB Funder today about flexible, investor-focused financing.
Need Builder’s Risk coverage? We’re happy to refer you to Starisks Insurance, trusted by investors nationwide.
