Fix & flip
Buy a property below its potential, renovate it and sell it. Profit comes from the gap between the all-in cost and the sale price.
How it makes money
You earn the after-repair value minus the purchase price, rehab, buying and selling costs, holding costs while you work, and tax on the gain.
The numbers to watch
- Profit
- What's left after every cost and, if you include it, income tax on the gain.
- Annualized return
- Your return on cash, compounded to a yearly rate so a 4-month flip compares fairly with a rental. 20%+ a year is strong.
- Max offer (70% rule)
- After-repair value × 70% minus rehab: a quick rule of thumb for your highest offer.
- Max offer for your target profit
- The highest price that still leaves the profit you want, using every cost in the analysis.
What to check before you buy
- After-repair value
- Base it on recent sales of renovated homes nearby.
- Rehab budget
- Get bids, and keep a contingency for surprises.
- Timeline
- Every extra month adds loan payments, taxes and utilities.
- Financing
- Hard-money loans are fast but expensive.
Risks
- Overruns
- Hidden damage and price increases eat the margin.
- Market shifts
- A softer market lowers the sale price or stretches the timeline.
- Tax
- Short-term gains are taxed at income rates.
- Permits
- Unpermitted work can delay a sale.
Run the numbers on your next deal
Opens a new analysis with this strategy picked. Free to try.
More strategies: Long-term rentals · Short-term rentals · BRRRR