A FLIP PAYS YOU ONCE. PRICE IT THAT WAY.

Flipping is a cash-suck business. And I mean that as a compliment.

FROM DEVON'S DESK

Here is a frame I shared with my investor list recently, and the more I sat with it, the more I realized the people who need it most are the operators I lend to every week.

Every business on earth is one of two things. A cash-flow business pays you on a schedule, money in every month, smaller pops, steady engine. A cash-suck business consumes cash for months and then pays you in one event. Flipping and developing are cash-suck businesses. From the day you close on the purchase, the money moves one direction: out. Interest, insurance, utilities, taxes, labor, materials. Every month ends negative. Then one day, the closing, everything comes back at once, plus your profit.

There is nothing wrong with that. Some of the best businesses in America run exactly this way, and some of the wealthiest operators I know built everything on it. I run a cash-flow business myself, and I will tell you plainly: the best flippers I lend to out-earn a lot of cash-flow businesses. But they all understand the one rule that makes the model work:

The payday has to pay for the drought.

THE MATH — YOUR MONTHLY CARRY NUMBER

Before your next purchase, know one number cold: what this project costs you per month to hold.

On a typical $400K flip, between interest, taxes, insurance, and utilities, carry runs roughly $5,000 to $6,000 a month. That number is the heartbeat of the whole deal, because it reprices your profit every month the project runs.

Run it this way. A $60K projected profit on a 6-month project is $10,000 for every month of carry and risk. The same $60K on a 12-month timeline is $5,000 a month, half the pay for double the drought. Same headline profit. Completely different deal.

So set your floor before you buy, not after. Decide what a month of your capital, carry, and risk is worth, then only buy projects that clear it. And always price the slip: if this project runs six months long, does the payday still pay for the drought? If yes, buy it. If it is close, negotiate the purchase until it is not close. The margin for the drought gets built in on day one or it never exists.

If you flip or build: put your carry number at the top of every deal sheet, next to the profit number. If you are an agent: this is why your investor clients care about days on market more than list price. Every week is carry. If you are a contractor: you are the pace of someone's drought. The subs who keep schedule are the subs who get every next job.

ONE THING TO STEAL

Add one line to your deal analysis, forever: profit per month of carry. Divide projected profit by projected months, then divide it again by the six-month-slip case. If both numbers still make you happy, that is a green light. Bring it to us and let's move.

My question this week: what is your monthly carry number on your current project? Reply with the number. I will tell you how it stacks up against what crosses our desk.

P.S. Flipping is a cash-suck business. That is fine. Just make sure every project pays for its drought, and that your lender is shortening it, not stretching it. Know an operator mid-project right now? Forward them this issue.

Newsletter Edition #32