What is a Fix-n-Flip?

U.S house flipping reaches 11-year high in 2017

Attom Data Solutions in a recent article stated that U.S. home flipping was at an 11-year high with as much as 200,000 homes flipped in 2017.  So what is house flipping or a fix-n-flip?  It's a real estate transaction that you purchase a property below market value, remodel or rehab it and then sell it for profit.  Using the risk/reward ratio, the risk is that you make a profit and the reward is that you made a profit. 

Several things need to occur to create a successful fix-n-flip and we are going to address them here.  Everyone has an opinion on fix-n-flipping; some claim it’s a great way to create supplemental income; while others claim it is another speculative-type money scheme to lose money.

The truth is, of course, in the middle!  The theory is that you find a property that’s undervalued and you buy it, then you rehab or remodel it and finally sell it to someone else.  If you do a good job, you make a profit; but if you have no experience or process, you can lose money.

Let's take it from the perspective of a real estate investor, such as myself.  Through personal experiences and that of others, I will take you through the processes required for success in this type of real estate investing.  Certainly, there are failures as much as successes and this probably can be differentiated by examining the paths of fix-n-flippers.

The risks are many and without having a solid plan, many have found fix-n-flipping disastrous.  But why do some succeed and succeed well?  Simply put, success is not luck, it’s having a process.  One of the risks is finding the right property.  Not every home in distress is a good deal!  In fact, to quote the real estate term “location, location, location” is also true in fix-n-flips. Location is very important because it must be in a safe neighborhood, close to schools and shopping and not too close to commercial areas or highways. 

Also knowing what types of properties plays a role in risk evaluation.  What will someone buy this property for in the end?  What are other or similar properties selling for?  If you acquire a property and don’t evaluate these factors, regardless of your rehab, a property will only sell for what someone else will pay for it.

Underestimating the rehab or suffering cost over-runs will also be a risk that you need to consider.  If the end cost of the rehab is too high, then this amount will come directly from your profit.  If you don’t incorporate conservative principles in this evaluation, you may find yourself with less profit or even having to bring money to the closing transaction.

Another consideration is having a contractor who understands your vision and pricing and can deliver an end-product on time and on budget.  More importantly, hiring contractors and sub-trades who can be relied on, to finish the job and produce quality work.  The contractor is also a person with whom you need to have a positive relationship with so that they remain motivated throughout the job.  Difficulties here, is a risk you hope to avoid as it will delay completion, or cause stress for lenders or eat up your profits.

Then you have the lenders.  They finance your project and you must meet with their guidelines and criteria from start to finish.  Many impose penalty clauses for delayed projects or additional fees.  If this occurs, that can only reduce your profits or cost you money.

Finally, selling the fix-n-flip once all is done.  Over-pricing, or having a stale market or unmotivated agents; can be another risk you have to understand.  Are there many risks in a fix-n-flip?  Definitely!  That is what we are aiming to avoid and why we are talking about it here.  There are mentoring programs available, at your costs, who can share with you processes and analysis that encompasses these risks and work with you to avoid them.

But what about the rewards?  It is said, “people don’t plan to fail, they fail to plan” and that is our focus in mentoring programs.  Would it be nice to create supplemental income from a successful fix-n-flip?  Could you use an extra $20,000 in your pocket?  The rewards of a fix-n-flip can do just that.  One successful fix-n-flip per year can make you that supplemental income that you need to achieve your goals and dreams..  Imagine having 2 or 5 or 10 or more successful fix-n-flips in a year.  It could surpass the income you make now and much much more.

We are not trying to portray fix-n-flipping as easy, to the contrary!  What we can show in this series, is how to be successful and provide you with the tools you will need for success.  Your success can only be determined by your efforts and attitude.

Send me your comments and share this in your social network.  Thanks for reading!