Fix and Flip - Fact or Fiction
There are many shows on A & E sharing the concept of fixing and flipping properties. These shows reveal how properties are purchased, rehabbed and sold. Most of the time there is a profit for the investor.
I like these shows. You get to see some great ideas on how to convert properties so they can be resold at a high price. Overall the concept is good.
The challenges I find with these programs is the information they choose to leave out. With this omission you cannot have the level of success they all seem to enjoy.
1) The biggest challenge in fix and flipping is getting the money- this is by far the one hurdle every investor must overcome. In many of the flip shows you see investors with the cash money to purchase deals. Although this is a great place to be in, the reality is that most people don't have access to that kind of cash. So even if they were all excited about getting into fixing and flipping properties they wont see a way to get it done.
2) Lenders don't like lending to amateurs - those with money didn't get it because they are a fool. They make wise lending decisions. When you are looking to get into fixing and flipping you have to convince a lender that you know what you are doing. They all want to get their money back as soon as possible. That means you have to tell them what you think it will take to renovate the home and what it will ultimately sell for. Fortunately there are contractors and real estate agents to help you do just that.
3) Focus is more on the renovation than the resale - renovating is important. But you need to know how each renovation will impact the sales price. If it doesn't make you money in the end then you may not need to be doing it. Keeping your eye on the bottom line is key to fixing and flipping.
4) You have to buy right to sell right - there is a formula you have to follow if you want to buy right. Basically you need the purchase price and renovation costs to equal 65% of the final sales price. If you can do this there is a chance you will make money investing.
Don't buy into all the hype if you are serious about becoming an Investor. Learn what you can from the programs but do your homework before you invest and lose money.