Fix and flip refers to the most common form of real estate investment. Under this strategy, an investor purchases an uncared for property (typically listed below market value) and proceeds to refurbish/repair the unit to later sell it for a substantial profit. Under this strategy, the investor looks for properties with potential; all fix and lip investors seek to buy low and sell high.
Fix and flip seems like a very simplistic equation, but like any transaction involving real estate, it
Cost and eventually pricing a piece of property, is the primary concern when it comes to such a maneuver; flipping houses for profit should not be practiced without paying considerable heed to a cost based analysis. Therefore, research and a basic comprehension that property is ultimately a tangible market product are vital aspects of the flipping process. Thus, one will have to determine, from the start, what the price of the flipped house will go for in accordance to similar properties on the market.
From there, nearly all experts advise working backward when deciding whether to flip the house for profit.agents, appraisers, and even contractors, one must determine how much the repair and restoration of a property will cost compared to the expected profit of the house flip. One must also consider the amount of time it can take to complete renovations of a property (and thus account for ongoing costs associated with home ownership, such as property taxes), as well as the assorted costs involved in closing the actual sale- including closing costs, attorney fees, and agent’s commission. After having a fair grasp on how much it will cost, and accounting for some irregularity and delay, then and only then can you determine how much to actually outlay when determining whether to purchase the original property.
Many novices who have never flipped a house for profit neglect the expenditures of the process, and often times exceed their budget or the value of the property in question. This unfortunate situation places the individual in a position to have to sell a piece of property at an exorbitant price. As a result of this, the property will often remain on the market too long, thus turning what was intended to be a profitably transaction into a stalled business venture.
Fix and flip can also be a fairly general term to reference the kind of loan usually sought in regards when flipping houses for profit. Therefore, sometimes additional collateral, including a mortgage on another property, is undertaken to cover the size of the loan.