“Fix and flip” is a real estate investment strategy that involves purchasing undervalued or distressed properties, renovating them, and selling them at a higher price for a profit. This strategy gained mainstream popularity through home renovation TV shows, but it requires real skill, market knowledge, and capital management to be profitable in real life. The key to success lies in buying the property below market value and accurately projecting the cost of renovations and the final resale value, known as the After Repair Value (ARV).
Most fix-and-flip investors look for properties with cosmetic or structural issues, often in up-and-coming neighborhoods where there’s potential for appreciation. Once acquired, the investor either does the work themselves or hires contractors to update kitchens, bathrooms, roofing, flooring, paint, and landscaping. The goal is to maximize value without overspending. Timing is crucial—carrying costs such as utilities, taxes, and financing can eat into profits if the project takes too long.
Many fix-and-flip deals are funded using hard money loans, which provide the speed and flexibility needed to secure deals quickly. The risk lies in potential overruns in cost or time, unexpected issues during renovation, or a downturn in the market. However, when done correctly, a successful flip can generate returns of 10% to 30% or more within a matter of months. It’s a high-risk, high-reward strategy that demands a hands-on approach, excellent project management, and a deep understanding of the local real estate market.