Does the thought of taking a broken-down property, fixing it, and selling it to a family looking for their dream home excite you?
There are many advantages to a fix-and-flip real estate business. This includes the unique opportunity to gain satisfaction from revitalizing a property, and a tremendous potential for profit from a fix-and-flip deal.
That doesn’t mean a fix-and-flip deal doesn’t come with risks. It does, and the best way to mitigate those risks is to increase your knowledge about the fix-and-flip process.
That’s exactly what we’ll discuss in this article: how to fix and flip a property step by step the right way, along with additional house flipping tools and resources to maximize your profitability.
If you’re ready to learn about a fix-and-flip deal and start flipping houses, let’s get started!
Are you dreaming of taking a rundown house transforming it and selling it for a juicy profit? You’re not alone! Fix and flip has become one of the most popular real estate investment strategies, especially for beginners looking to break into the property market. But what exactly is fix and flip, and how can you get started?
What is Fix and Flip?
Fix and flip is a real estate investment strategy where investors purchase a property at a discount (usually because of its poor condition), renovate it, and then sell it quickly for a profit.
The basic formula looks like this
- Buy low (distressed property)
- Fix up (renovations)
- Sell high (for profit)
- Repeat!
According to Sharestates, investors typically target properties that have “lapsed into disrepair due to abandonment or because the current owner couldn’t pay for the upkeep.” These properties might need just cosmetic updates in some cases, but more commonly require major renovations. Sometimes, the property might not even be legally habitable until certain repairs are made!
Understanding the Financial Side: ARV vs. Fix-and-Flip Value
When flipping houses, you need to understand two important values:
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Fix-and-Flip Value This is simply the cost of buying the property plus the cost of all repairs
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After-Repair Value (ARV): This is the estimated market value of the property once all repairs are completed.
The difference between these two numbers is your expected profit. And let’s be honest – that’s what we’re all in it for!
As Sharestates puts it: “It makes no financial sense to buy a house, spend $25,000 fixing it up, then flipping it for the purchase price plus $25,000. Investors would neither gain nor lose money that way but would waste a lot of time and effort.”
Instead, the goal is to strategically invest in improvements that add more value than they cost. For example, spending $15,000 on new plumbing and electrical might add $25,000 to the resale price, while investing another $10,000 in windows, shutters, and landscaping could add $20,000 in value. In this scenario, $25,000 in renovations yields a $45,000 increase in value, resulting in a $20,000 profit!
How to Fix and Flip a Property in 8 Steps
Let’s break down the process into manageable steps. I’ve been following these myself, and they’ve worked pretty well so far!
Step 1: Research (AKA Do Your Homework!)
Benjamin Franklin once said, “By failing to prepare, you prepare to fail.” This couldn’t be more true for fix and flip investments!
Before you even think about buying a property, you need to:
- Understand your local real estate market inside and out
- Know how to spot a good deal
- Project how much renovated properties typically sell for in your target area
- Calculate average days-on-market for homes in your area
- Learn about renovation costs, permits, and zoning requirements
- Build a reliable team (contractor, real estate agent, etc.)
Don’t skip this step! I made that mistake on my first flip and boy did it cost me. Research is your foundation for success.
Step 2: Find a Property
Once you’ve done your homework, it’s time to find the right property to flip. You can:
- Work with a real estate agent who understands investment properties
- Search for FSBOs (For Sale By Owner)
- Look for distressed or abandoned properties
- Network with other investors who might have leads
When evaluating potential properties, consider:
- Location (the most important factor!)
- Risks and benefits
- After-repair value (ARV)
- Comparable properties (“comps”)
- Required renovations (do a thorough walkthrough)
Step 3: Secure Financing
Unless you’ve got piles of cash sitting around (lucky you!), you’ll need financing for your fix and flip project. Options include:
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Traditional Loans: Banks and credit unions may offer mortgages, though they’re often reluctant for fix-and-flip properties. Experienced flippers have better chances here.
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Private Money Loans: Most flippers use private money lenders who specialize in fix-and-flip loans. These loans are easier to get but typically have higher interest rates.
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Alternative Methods: Home equity loans, HELOCs, crowdsourcing, or partnering with other investors.
Whatever option you choose, make sure your financing is in place BEFORE you commit to buying a property!
Step 4: Create a Scope of Work
The scope of work is basically your roadmap for the renovation. It outlines exactly what needs to be done and helps contractors bid accurately.
When deciding what to fix, ask yourself these four important questions:
- Will it add value?
- Will it help sell?
- Is it cost-effective?
- Is it needed?
Remember: you’re not renovating your dream home—you’re creating a product to sell for profit!
Step 5: Find the Right Contractor
Don’t just go with the lowest bid! Find a contractor who:
- Is responsive (time is money in fix and flip!)
- Has a portfolio of similar projects
- Comes with good references from other investors
- Respects deadlines and budgets
- Delivers quality work
You can find contractors through:
- Better Business Bureau
- Angie’s List
- Craigslist
- Referrals from other investors
Also decide who will manage the project. It could be you, but remember this takes time away from finding your next deal.
Step 6: Renovate the Property
During renovation, your biggest challenge is staying on budget and on schedule. Every day the property sits unfinished is a day you’re not making money.
You can be hands-on or hands-off during this phase, depending on your experience and preferences. Just make sure you:
- Stay updated on progress
- Address issues quickly
- Keep an eye on the budget
- Ensure all work meets quality standards
- Get necessary inspections and approvals
Step 7: Stage & Sell the Property
Once renovations are complete, it’s time to prep the property for sale:
- Have it professionally cleaned
- Consider hiring a professional stager
- Invest in high-quality professional photos (NOT smartphone pics!)
- Work with a good real estate agent to market the property
The whole point of fix and flip is selling for profit, so don’t rush this step. A well-staged, well-marketed property will sell faster and for more money.
Step 8: Debrief & Repeat
After you complete your flip, take time to reflect on the process:
- What went well?
- What could have gone better?
- What surprised you?
- What would you do differently next time?
Use these insights to improve your next project and build your fix and flip business!
Advantages of Fix and Flip
There’s a reason why so many people are drawn to fix and flip investing:
Quick Returns
Unlike rental properties or long-term appreciation plays, fix and flip delivers profits quickly—usually within 6-12 months.
Great Learning Experience
Fix and flip is a crash course in real estate! You’ll learn about finding deals, renovation, financing, marketing, and selling.
Flexibility
You can be as hands-on or hands-off as you want, depending on your skills, budget, and preferences.
Disadvantages of Fix and Flip
Of course, it’s not all sunshine and rainbows:
Budget Overruns
Renovations often cost more than expected, especially when unexpected issues pop up during construction.
Market Vulnerability
If the real estate market slows down while you’re trying to sell, you could face longer holding times and lower profits.
Fewer Tax Advantages
Unlike rental properties, fix and flip doesn’t offer ongoing tax benefits since you’re selling quickly.
Time-Intensive
Even with contractors doing the work, managing a flip takes significant time and attention.
Common Fix and Flip Mistakes to Avoid
Learn from others’ mistakes so you don’t have to make them yourself!
Not Knowing the Local Market
You must understand local trends and buyer preferences to succeed.
Over-Improving the Property
Remember: you’re renovating to sell, not to live in. Don’t waste money on high-end finishes that won’t boost your sale price.
Taking on Too Much
Start with simpler projects and work your way up as you gain experience.
No Business Plan
Going in without a plan is a recipe for disaster. Document your strategy, budget, timeline, and exit plan.
Overpricing the Home
Don’t get emotionally attached. Price based on comps, not on how much work you put in.
How Much Can You Make Flipping Houses?
According to ATTOM Data Solutions, the average gross profit for house flipping was around $68,800 in late 2021. But your actual profit will vary based on location, skills, project type, and market conditions.
Remember: gross profit doesn’t account for holding costs, financing costs, realtor fees, and other expenses. Your net profit will be lower!
The Bottom Line
Fix and flip can be an exciting and profitable real estate investment strategy if done right. The key is thorough research, careful planning, realistic budgeting, and efficient execution.
I’ve been in this game for a few years now, and while it’s definitely not as easy as those TV shows make it look, it can be incredibly rewarding—both financially and personally. There’s nothing quite like seeing a rundown property transformed into someone’s dream home… while putting a nice chunk of change in your pocket!
Ready to give it a try? Start with Step 1: Research, and see where the fix and flip journey takes you!
Step 7: Stage & Sell The Property
After the contractor has finished work and the renovations are complete, the next item is to put the house on the market — but to entice buyers, you need to stage the home.
It’s important to have it cleaned and utilize a stager.
Remember: photos from a smartphone don’t compare to high-quality and professional s.
The end all goal of a fix and flip is selling a property for a profit.
This positive return on your fix and flip investment ensures that you are in a position to purchase another property once the first one sells.
Allow your real estate agent to market the property and bring you offers from potential buyers.
Once you’ve found an offer that works for you, it’s time to debrief and repeat the process.
Flipping Mistake #4: Failure to Write a Business Plan
When you are trying to make money from a find and flip property, it’s important that you have a written business plan to serve as your guideline.
Flipping a house can be a lucrative investment, but it’s crucial that you have a written plan about how to flip a house.
You don’t want to be making decisions on the fly, and a business plan ensures that you’re not.
When you have a written plan that covers costs, marketing, contractors, and every other aspect of your find and flip, you are far less likely to waste money by responding to issues instead of being proactive.
The surest way to make a profit flipping houses is to start with a business plan.
How to Start Flipping Houses as a Beginner
FAQ
What exactly does fix and flip mean?
A “fix and flip”, also known as house flipping, consists in purchasing a property in need of repairs for a discount, renovating it, and selling it for a profit within a short time. Keep in mind that if a property is bought at full purchase price, this will yield much less of a profit when it comes time to sell.
Are fix and flips risky?
No reward comes without some degree of risk. Although you can make a lot of money quickly, you can lose a lot of money just as fast. One of the best ways to purchase homes for flipping is through auctions or foreclosures.
How does a fix and flip loan work?
A fix and flip loan is a short-term financing solution investors can use to buy and renovate a residential property with the intent to sell it for a profit. The loans are a type of small-business loan investors use to pay for buying a property and renovating it.
What is the fix and flip method?