A Complete Guide to Fix-and-Flip Properties

Buy, renovate, profit — without the rookie flip mistakes.

Flipping looks simple on TV: buy the ugly house, swing a few hammers, cash a big check by the last commercial. Real flips don't work that way. The margins can be tight, and one wrong call on inspections, design choices or pricing can eat your profit faster than you'd expect.

This guide is for first-time flippers and for anyone who's done a few and wants a tighter process. I've worked alongside investors at both stages, and the ones who do well treat every flip like a business from the first day.

Work backward from the after-repair value

Decide what you can pay before you fall for a house. A common rule of thumb is the 70 percent rule: take 70 percent of the home's after-repair value, then subtract your estimated repair costs. What's left is the most you should offer.

Here's the guide's example, just to show the math. If a house should be worth $350,000 once it's finished and needs $50,000 of work, 70 percent of $350,000 is $245,000, and subtracting the repairs leaves $195,000. That 30 percent gap isn't extra money. It covers your profit, selling costs, taxes and a buffer for risk.

The costs people forget

The purchase price and the renovation are the obvious numbers. The ones that hurt are the ones that never make the spreadsheet:

• Monthly holding costs while you work: property taxes, utilities, loan interest, HOA dues and insurance, which usually costs more on a vacant house
• A contingency for surprises, because mold, permits and plumbing problems turn up on a lot of projects
• Closing costs on both the purchase and the sale, including the agent's commission, which is negotiable and not set by law
• A property tax bill that may rise once the county reassesses the improved home
• Your own time, which has a real cost even if you're not paying yourself

Then there's tax on the profit. How a flip is taxed depends on things like how long you own it and how you hold it, so bring in a CPA early, ideally before you buy.

Ask what each repair will touch

One renovation almost always triggers another. A new kitchen can mean electrical, plumbing, subfloor and trim work. New siding can uncover moisture under the windows. A new roof can lead to soffit, fascia and gutter repairs. So get a line-item bid from a contractor before you close, and handle the roof, HVAC, plumbing and electrical before anything cosmetic.

I'd also ask one blunt question on every deal: would I still do this if repairs ran 10 to 15 percent higher? If the answer's no, the deal is too thin to take.

Common questions about fix-and-flip properties

How long does a flip renovation take?

The guide uses six to ten weeks as a rough target for North Georgia flips under 2,000 square feet, and that assumes few delays. Contractors, back-ordered materials, surprise repairs and permits can all stretch it, so the guide suggests budgeting holding costs for at least four to six months.

What if the house doesn't sell as fast as planned?

Have a backup plan before you buy. Part of choosing an area is asking whether the house could work as a rental if the sale takes longer than you hoped.