Fix and Flip
Definition
Fix and flip is a real estate investment strategy where an investor purchases a distressed or undervalued property, renovates it, and sells it for a profit. Fix-and-flip financing is typically provided through hard money loans or bridge loans because traditional banks are too slow and have too many restrictions for this strategy. Key metrics include the ARV (after-repair value), renovation budget, and holding costs (interest, insurance, taxes, utilities during the renovation period). Successful fix-and-flip projects typically target a profit margin of 15–20% of ARV after all costs including financing, renovation, and transaction fees.
Example
An investor buys a property for $180,000, spends $60,000 on renovations over 4 months, and sells for $320,000. After financing costs ($15,000), closing costs ($12,000), and holding costs ($8,000), net profit is $45,000 — a 14% return on the $320,000 ARV.
Related Terms
Bridge Loan
A bridge loan is a short-term financing solution designed to 'bridge' the gap between an immediate c...
Hard Money Loan
A hard money loan is an asset-based loan secured primarily by the value of real property rather than...
After-Repair Value (ARV)
After-Repair Value (ARV) is the estimated market value of a property after all planned renovations a...
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