Have you ever driven past a run-down house and imagined its potential? That’s the magic of fix and flips! Through this investment strategy, you can transform distressed properties into beautiful, livable homes while generating substantial profit. Many investors use fix and flips to generate the cash for future real estate investments while revitalizing neighborhoods, one renovation at a time.
Fix and flips remain one of the most lucrative ways to build capital in real estate. The process is simple in concept: purchase a distressed property, renovate it, and sell for a profit. This blog breaks down 10 tips to help you maximize your profits and minimize your risk when investing in fix and flips.
10 Keys to Investing in Fix and Flips
1. Follow the 20% Rule
A good rule of thumb with fix and flips is the 20% Rule: aim to make at least $20,000 in profit for every $100,000 you invest. This guideline helps ensure that your time, effort, and risk are worth the reward. In some markets, hitting that 20% margin may be easier than in others. However, setting this as your baseline can keep your investments healthy and sustainable. If you’re using flipping as part of a broader strategy (like building cash reserves for future rentals), try to make sure at least one in every three properties you buy can be flipped for a quick profit.
2. Time the Market Wisely
The timing of your investment is crucial. The best time to flip houses is when inventory is low and demand is rising. Analyze supply and demand by looking at housing trends over the past five years. Although no one can perfectly predict the real estate market cycle, staying informed can give you an edge. Even in tighter markets, savvy investors with efficient teams and strong market knowledge can still turn a healthy profit.
3. Know the Area Inside and Out
Before purchasing any property, deeply research the local area. Find real estate agents who not only know the market but also invest in real estate themselves. Ask questions like:
“What neighborhoods would you avoid and why?”
“What are common structural or maintenance issues in this region?”
For example, in some Southern U.S. markets, homes may have hidden issues like poor plumbing due to buried trees under the foundation or moisture-related problems with EIFS stucco. These insights can save you thousands—and a lot of headaches. Always perform a plumbing scope to check for sagging or damaged lines, especially in as-is purchases.
4. Complete Renovations in 60 Days or Less
The faster your turnaround, the more profitable your flip. Ideally, aim to complete renovations and list the property within 30–60 days. Holding costs (especially interest on loans) add up quickly. Even better? Start renovations immediately and get buyers interested early. A 10-day turnaround to get under contract and a closing in 45 days could net you a major profit. Remember: time is money, especially when you’re using borrowed funds.
5. Pick Neighborhoods with Fast Sale Times
Target areas where homes sell in under 90 days. Fast turnover is a sign of high demand and desirability. Use tools like Zillow or Realtor.com to track how long similar properties stay on the market. Avoid flipping in areas where homes sit for months. Those carrying costs can eat into your profits, and the longer your home is unsold, the more you risk unfavorable market shifts.
Ready to take the leap into Fix and Flips? Master this strategy and more at The WealthBuilders Real Estate Workshop!
6. Understand Lending Guidelines
Think ahead to your potential buyer. For example, many first-time homebuyers use FHA loans, which have specific repair requirements. Make sure your renovation plan aligns with these guidelines so your home qualifies for the widest pool of buyers. This isn’t just about making your property beautiful—it’s about ensuring it can be financed easily. If your buyer can’t secure a loan, your home could sit unsold or require last-minute repairs.
7. Get the As-Repaired Appraisal Right
Work with lenders who offer as-repaired appraisals. This means they evaluate the value of the home after renovations—important for determining how much you can borrow (and eventually sell for). Also, find out if your lender allows repair funds to be held in escrow. This can make it easier to finance renovations without draining your personal savings. The appraisal will give you a realistic benchmark for your final selling price, helping you make smarter investment decisions from day one.
8. Find Financing for Your Buyers
Sometimes, a deal falls through simply because the buyer can’t get financing. Smart flippers build relationships with mortgage brokers and bankers who can help get buyers approved quickly.
If you’re flipping a unique property—like a manufactured home or mixed-use building—connect with lenders who specialize in those types. The easier you make the buying process, the faster you’ll close the deal and move on to the next project.
9. Have a Reliable Repair Team (or Two)
Your repair team can make or break your flip. Delays, poor workmanship, and unreliable contractors all eat into your profit. Vet your contractors thoroughly and aim to work with crews that are fast, efficient, and consistent.
Better yet, have multiple teams on standby. If you find a second great deal before the first project is finished, you’ll need another team ready to go. Never buy more properties than your team can handle—flipping only works if your renovations are on time and on budget.
Related: 8 People You Need on Your Real Estate Team
10. Focus on Cosmetic Improvements
Avoid properties that require major structural overhauls unless you have experience and a healthy budget. Instead, look for homes that need cosmetic upgrades—fresh paint, updated kitchens, modern fixtures, and strategic staging.
Staging can also help offset less-than-ideal features (like bold tile or unusual layouts). Look at model homes for inspiration on current trends, and remember that your goal is to create a home that buyers can instantly picture themselves in.
Final Thoughts
When done correctly, fix and flips can be an incredible wealth-building strategy and provide quick cash to scale your portfolio. They offer the chance to build capital quickly, learn valuable skills, and make a tangible impact in your local community. With the right approach—timing the market, understanding your area, building the right team, and choosing smart financing—you can reduce risk and increase your chances of long-term success.
Ready to jump into your next (or first!) flip? Start by putting these 10 keys into action, and you’ll be well on your way to turning distressed properties into profitable investments. Then, register for The WealthBuilders Real Estate Workshop to gain the market insights, connections, and prayerful partnership you need to confidently take your next step. Click here to register, and check out the video below to learn more.
