Melissa Deal’s Panel Recap At IMN SFR East Conference

Melissa Deal, Head of Sales at Roc Capital, shares key insights from a recent Fix-and-Flip Overview Panel discussion, covering market trends, DSCR exits, underwriting changes, housing legislation, and opportunities for investors heading into 2026.

Chapter 1: Fix-and-Flip Market Trends in 2026

Hi, I'm Melissa Deal, Head of Sales with Roc Capital. On the Fix-and-Flip Overview Panel, we talked about trends in fix-and-flip investing over the past year and what we expect heading into 2026. We also discussed how proposed legislation currently moving through the Senate could affect fix-and-flippers, including the availability of buyers for their finished properties. There is definitely a lot of uncertainty surrounding the potential legislation. At the same time, there is also uncertainty within the fix-and-flip lending market itself. There are more lenders competing in the space than ever before. Rate compression continues, leverage is higher than ever, and fix-and-flip financing has become increasingly commoditized. Despite those challenges, we continue to see strong performance. At Roc Capital, we've experienced record levels of activity in both loan volume and total funded volume over the past several months. One of the biggest takeaways from the discussion was how the profile of active flippers has changed. More experienced, professional flippers are completing a larger share of projects today than they were a few years ago. Housing inventory remains difficult to find, and investors with experience have a significant advantage when it comes to sourcing deals. They understand their markets better, know how to identify opportunities, and are often able to act more quickly and confidently than newer investors. That market knowledge also helps investors determine which improvements will create the most value. Understanding what buyers want, how neighborhoods are performing, and where pricing is heading can have a significant impact on profitability.

Chapter 2: Why More Investors Are Choosing DSCR Exits

Another important takeaway from the panel was the increase in DSCR exits. Throughout late 2025 and into early 2026, days on market have increased for flipped properties. During 2023, 2024, and much of early 2025, home prices were appreciating rapidly and properties often sold very quickly. Today, conditions are different. Because homes are spending more time on the market and final sales are taking longer, more investors are choosing to transition their properties into rentals rather than immediately selling. As a result, we've seen a noticeable increase in the percentage of fix-and-flip projects converting into DSCR loans as an exit strategy. We also spent a considerable amount of time discussing the importance of understanding local economic conditions. It's not enough to understand your MSA. Investors need to understand their specific neighborhoods and submarkets at a very detailed level. Those who truly understand local market dynamics are much less likely to encounter surprises when it's time to sell or refinance. Another major point was the increasing importance of property valuations. Valuations have always been important in DSCR lending, but they have become even more critical in the fix-and-flip and RTL space as market conditions become more complex. Interestingly, more lenders are now discussing profit tests when evaluating deals. Roc Capital has always used a profit test because we believe it is one of the most effective ways to evaluate whether a project truly makes sense. We want to be a lending partner, not just a capital provider. Ensuring borrowers have a clear and realistic path to profitability benefits everyone involved in the transaction.

Chapter 3: Profit Tests, Valuations & Underwriting Changes

For years, borrowers often told us that Roc Capital was one of the only lenders using a formal profit test. Today, more lenders are beginning to adopt similar approaches as they evaluate fix-and-flip opportunities. One of the biggest underwriting changes we've made this year involves placing an even greater emphasis on internal valuations. We have built a dedicated valuation team that now consists of approximately 15 professionals and continues to grow. Their role is to carefully review appraisals, compare valuations, evaluate market conditions, and provide independent assessments that support our underwriting decisions. As market conditions become more nuanced, accurate valuation analysis becomes increasingly important in determining both project feasibility and long-term success.

Chapter 4: Housing Legislation & Renovation Rules

Part of the proposed Road to Housing legislation includes carve-outs for larger renovation projects. While the legislation has not yet been finalized, both House and Senate proposals contain various definitions of what qualifies as a substantial renovation. One proposal defines a major renovation as improvements totaling at least 15% of the property's purchase price. When we look at the average renovation budget we see—approximately $70,000—that threshold is often already met on many projects. As a result, that particular definition may not significantly change how we evaluate deals. Another proposal focuses less on renovation cost and more on whether significant systems within the home are being replaced. This includes things such as HVAC systems, plumbing, electrical systems, and other major components. The goal is to prevent investors from performing only cosmetic upgrades while still qualifying for favorable treatment under the legislation. Policymakers want to ensure these carve-outs apply to meaningful renovations that truly improve the property's value and condition. When discussing light versus heavy renovations, it's important to recognize that larger renovations have traditionally provided greater profit opportunities. For example, if an investor purchases a home for $200,000 and spends only $10,000 on improvements, the increase in value may be relatively modest. However, if that same investor spends $60,000 on kitchens, bathrooms, flooring, paint, HVAC systems, and other substantial upgrades, the resulting increase in value can be significantly greater. Because value creation tends to be exponential rather than linear, investors who undertake larger renovations often position themselves for larger profits. Substantial renovations also tend to create a more compelling finished product for buyers, which can further improve exit opportunities.

Chapter 5: Opportunities for Experienced vs. New Flippers

So, is the fix-and-flip market in 2026 better or worse than it was a year ago? The answer depends largely on who you're talking about. For experienced investors who know how to source deals, evaluate neighborhoods, and manage projects efficiently, today's market may actually present better opportunities than it did a year ago. There are more lenders competing for business, financing remains readily available, leverage levels are attractive, and investors who know what they're doing can still find profitable projects. For newer investors, however, conditions are more challenging. Limited inventory remains a significant obstacle, and experienced operators are often securing the best opportunities before less experienced investors have a chance to compete. As a result, investors entering the space today may face a steeper learning curve than they would have a few years ago. Ultimately, success in today's environment depends heavily on experience, local market knowledge, disciplined underwriting, and the ability to identify opportunities that others may overlook.