Fixing and Flipping: It’s a Numbers Game

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You can’t polish a turd.  That’s what my Dad said to me.  On prom night.  Gee, thanks Dad.

One thing I’ve learned from being in the fix and flip business is that you may not be able to polish a turd but you can put lipstick on a pig.  And in certain cases some extremely expensive mascara and cover-up.

Currently, I have six houses on the books, three of which are in escrow.  The other three are active on the multiple listing service.  The acquisition price for each of these properties ranges from $140,000 to $486,000.  My rehab costs vary too, from $14,000 to $48,000.

The three houses I have in escrow cost me the least to buy, and remodel:

  • 37th – Purchase price $140,000, $23,000 in repairs
  • Melinda – Purchase price $184,000, $15,000 in repairs
  • Gemini – Purchase price $278,000, $15,000 in repairs

And two of the three active listings I have cost me the most to buy, and fix up:

  • Frye – Purchase price $340,000, $37,000 in repairs
  • Cosmos – Purchase price $486,000, $48,000 in repairs.

So by now you’re probably thinking that I’ll make more money on the higher end flips right?  I mean that’s what I thought.  Well, three price drops and 44 days later I’m looking at a loss on both of these deals.

And the three lower-priced deals that I have in escrow?  Together they will net me the highest return on investment I’ve ever had for a fix and flip.

Warren Buffett has a saying.  Actually, he has a lot of sayings.  But one of my favorites is “Don’t lose money”.  I’ve learned that the best way to not lose money fixing and flipping is to do a lot of deals.  Since 2009, I’ve flipped 60 deals and lost money on six of them.  Because I made money on 54 the six losses didn’t hurt that bad.

Plain and simple – it’s a numbers game.  Now go get your lipstick.

About Author

Marty (G+) is the Chief Financial Officer for Rising Sun Capital Group, LLC, a real estate investment firm based in Gilbert, AZ. His firm purchases homes at the courthouse steps and public REO auctions. They have two exit strategies, either fix and flip or seller financing.


  1. Hey Marty, great article! I cringe at the prices of the houses you are buying, I should have $140k total in my latest flip, the numbers your throwing around scare me at this beginning stage of flipping. We are almost done with a full rehab I mentioned in another story we talked back and forth on. Michelle and I are both thinking the quick lipstick on a pig flips are the way to go unless we run into a steal, but that we will probably just focus on the quick ones. 60 since 09 huh? And we were thinking a goal of 6 would be good. I need to up the goal huh? I need to get a better handle on PML and HML, right now we are just using our own cash.

  2. Hi Marty,

    Not sure if anyone famous said this but, I have heard alot of investors say, that your fix-n-flips should fall in line with the median cost of a home in the county. (p.s. – no plans to be famous, but if that sounds like good advice, I will take credit for it, if no one else does! LOL)

    • Keith, I’ve never heard that before but it’s good advice. Median prices here are around 115K and that price point is saturated with buy and hold investors. In order for us to make a buck we need to aim a little higher. Still lots of buyers in the 200-300K range.

      • How do you do it. I found a property for $55k, put in $78 and it’s in escrow for $225. But you guys are doubling your money and that’s fantastic.
        I could find homes in $55k further out but there just aren’t a lot of sales in those areas, plus I’m think I need to get way more under my belt before I go away from my target area.

  3. Great advise. I use to apply that same rule to my former business of building new rental houses to Investors, back in the Sub-Prime days. It worked very well for me them. I would have 10 to 50 houses going at one time, when I was over budget on a group of houses, it never interrupted my cash-flow.
    I’m currently flipping houses in the Hampton Roads, Va. area. I only have one Lender, and they only allow me to do 1 to two deals at a time. Which I think is very risky. I have been very careful in only closing on home-run deals in neighborhoods with very good schools, the lowest priced house I can find, with the highest upside in price after rehab, and where Military families want to live.
    A typical deal for me is around $50 to 85K purchase price, $30 to $40K in rehab, and a sales price from $207K to $255K resale price. I option out the homes with features of a house $500k to $700K home has, which allows me to sale the homes within 60 days after rehab. I’m doing great, but I could be getting rich, if I could find more lending sources. Could you make some suggestions?

    • Dwayne, establishing a track record is key to raising new capital. Do you have a pro forma to show potential new investors/lenders? Can you back up your numbers with a P&L and balance sheet? Have any of your tenants actually exercised their option to buy? These are all questions seasoned investors/lenders will want answers to.

  4. I’m curious about what the numbers were on the 2 bigs deals (well all of them, but more interested in learning from the mistakes).
    What were your ARV’s on those to start? Did you go far over budget on the rehabs? What are your financing terms? Seems like 44 days should not be a killer unless your carrying costs are really high.
    I have only been doing small deals with a high profit margin. I want to do bigger deals since you can make much more absolute dollars, but I know you have bigger risk too.

    • Shaun, the real estate market here in Phoenix is red hot. Inventory levels are very low and we’re typically getting offers in the first 3-10 days on market. There’s about a 2-3 month supply of homes. When a house sits for more than 30 days here the perception in the market is there is something wrong with the property. Basically, I overestimated the value on both of these higher end flips and it will cost me dearly.

  5. I am curious about what the numbers were for the 2 that you are looking to take a loss on (Well all of them but more interested in learning from the msitakes).
    What were your ARVs? Did you go much over your budgets on the rehabs? What are your financing terms? Seems like 44 days shouldn’t be killing you unless you have big time holding costs.
    I have only beed doing small dollar deals up to this point but want to get into some bigger ones. Higher ARVs is where you can make a lot more absolute dollars per deal but you have a lot of risk there too so I want to try to take advantage of your experience so I can try to minimize my mistakes.

  6. Great article Marty. Love the statement “you may not be able to polish a turd but you can put lipstick on a pig.” We were involved in a smaller fix and flip around the $160 price range and had a lot of fun doing it. The house was on the market less than 2 weeks. Potential buyers seem to love that lower to middle of the market niche.

    As house painters we were able to repair and repaint without totally gutting this particular home and save money and protect the bottom line. Its really amazing what you can do with a little bit of drywall compound and paint. Would we do it again… maybe. But we would like to stick to what we are good at.


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