Real Estate Investing 101 April 10, 2023

Real Estate Investing 101: Fix and Flip


Fix and flip, also called house flipping, is a term used for the real estate investing strategy of purchasing a property and selling it within a short period of time for a profit.  Typically the property is distressed or run-down and the process of renovating and improving it increases the value.  It requires an active investor, or an investor with a team, ready to roll up their sleeves and get to work!  Actual hands-on, manual labor type work.  It also requires a fair bit of calm under pressure, as this type of investment carries some significant risk as construction, financing and renovation costs add up.  If fixing and flipping a property sounds interesting to you, here is a summary of the process.

Find a property

The process has a couple of key points.  The first is finding a suitable property.  This is most often one in need of repairs or renovations.  With these properties, the largest increase in value comes from fixing those issues.  It is very important to be thorough in this step.  There will always be surprises, but identifying as many issues as possible here will allow you to accurately estimate your costs down the road.  

Occasionally, you may find a property that is in good shape but very undervalued that can be sold at a higher price just with some minor cosmetic changes.  Many times these are properties that, for a variety of reasons, require a quick sale.  Unfortunately, many of these properties are NOT found on the local multiple listing service (MLS).

Flip the Property  

Either way, once the property is purchases, the work begins!  This is where your diligence in the fist step really pays off.  Knowing the issues that need to be addressed will allow you to begin the process of scheduling workers immediately.  Time is money in a fix and flip, so the sooner all work is done, the sooner the property can be sold.  Remember, the you want want your fix and flip’s sales price to cover the original purchases price, plus all renovation, financing and sales costs, as well as provide a profit.

The goal of fixing and flipping is to make a quick profit by improving a property and selling it within a short period of time.  It sounds easy and television shows like Flip or Flop and Good Bones often make it look that way.  Real life is, of course, a little different than these “reality” shows!  The strategy requires a significant amount of knowledge about the local real estate market, an understanding of construction and renovation techniques and costs, and the ability to manage a project effectively.  It can be a fun and lucrative investment strategy, if done correctly.  But, it can also be a money sucking nightmare if done incorrectly! 

Should you try a fix and flip?

Doing a fix and flip can be an exciting challenge for some people.  But, it isn’t a strategy that fits everyone’s temperament, skills or interests.  But then, no strategy does!  If you decide to take on a fix and flip, but sure that you either have the skills or have a team with the skills to evaluate the proerty and complete the work.  This includes real estate market expertise, construction knowledge, finance and project management skills, to name just a few.  If it’s not for you, don’t worry!  There are other real estate investment approaches that may be.

Thanks for reading.  Remember, I don’t know you or your specific situation.  Nothing in this article should be taken as advice specific to your situation.  If you have any questions, though, please get in touch – you can find my contact form here.  Also, feel free to sign up here for my monthly “Neighborhood News” newsletter for real estate information on your local area.