"Fix and Flip"
Today we want to introduce you something really popular among investors, Fix and Flip. Below you find an easy explanation of it.
Fix and flip” real estate is a popular investment strategy where an investor purchases a property (often below market value), renovates or improves it, and then sells it for a profit.
Here’s a breakdown of how it works and key things to know
How Fix and Flip Works:
1.Finding the Property:
•Look for undervalued homes (often distressed or outdated).
•Common sources: foreclosure auctions, wholesalers, MLS, probate sales.
2.Financing the Deal:
•Investors use cash, hard money loans, private lenders, or traditional mortgages (less common due to speed).
•Hard money loans are popular because they’re quick but come with high interest.
3.Renovation:
•Focus is on value-adding improvements (kitchens, bathrooms, curb appeal).
•It’s critical to stay on budget and on schedule.
4.Selling for Profit:
•Once fixed up, the property is listed for sale at a higher price.
•The goal is to sell quickly to reduce holding costs (loan interest, taxes, utilities).
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Key Numbers to Know:
•ARV (After Repair Value): Estimated value of the property after renovations. Example:
you buy at 100k and after repaired value is 150K. This is key to understand your numbers and if it's time to go in or wait for the next one.
•70% Rule: A general guideline—investors try to pay no more than 70% of the ARV minus repair costs.
•Formula:
Max Purchase Price = (ARV x 0.70) - Repair Costs
Exist strategy: Always ask your self and your partners about it, several options depending on the market
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Pros:
•Potential for high profits in a short time.
•Lower capital needed compared to long-term holds.
•Great for learning renovation and real estate skills.
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Cons:
•Risk of cost overruns or market changes.
•Need for solid contractor management and budgeting skills.
•Short-term capital gains taxes can be high.
•Holding costs can eat into profits if the property doesn’t sell fast.
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Tips for Success:
•Always inspect thoroughly before buying.
•Know your market: comps, buyer demand, price trends.
•Build a good team (contractors, real estate agents, lenders).
•Have a backup plan in case the flip doesn’t sell quickly (like renting it out).
And we want to add one that is really key, know your market and your areas, drive around,
have a feeling about it that goes beyond your due diligence, don't rush into a deal because you want to start at all cost.
What makes a real differnce is experience, timing, mortgage arrangements and many other factors beside the discussed ones.
Nowdays a lot of companies offer really nice LTV and ARV, some even close to 0 if experienced.
This is a really long subject and we will get back on it with some more tips and infos, we have been working in this field for years so if you have questions and looking for some more infos
please feel free to contact us.
IRE Staff
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