Making money with a “fix and flip” property is a great way to make money in real estate. However, it isn’t about repairing drywall and planting flowers. It’s all about how you do the numbers.
People often buy and sell a fixer-upper without a definite plan. They buy a house, fix it up, then add $10,000 or $20,000 onto their costs. They then put the house up for sale at this price.
Have you ever bought a house according to what the seller has into it? Of course not. You look at similar houses to determine the value. If you have $110,000 into a fix-and-flip project, and similar homes are selling for $105,000, how much will you get? It has nothing to do with what you’ve spent, does it?
The Fix And Flip Formula
1. Determine the after-repair value of the house you’re looking at. Get an appraiser’s help, or look at what similar houses have actually sold for (not asking prices). The price it’s likely to sell for is going to be your starting point.
2. Calculate costs: closing fees, loan fees, document prep, homeowner’s insurance, title policy, repair costs, interest on loans, property...
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