Advice on entering the fix & flip industry
Joseph KirkPro Member
Member since 2023 · 41 posts · 17 votesAdvice on entering the fix & flip industry
Most Popular Reply
Noah WrightBusiness Member
USA, Nationwide · Member since 2024 · 174 posts · 90 votesQuote from @Joseph Kirk:
I am looking to get into doing fix & flips. I currently have 3 rental properties and now want to move on into fix and flip...
Joseph, it's great that you're looking to expand into fix and flips, and having three rental properties already gives you a solid foundation. Here are some key tips and insights for getting started:
1. Step-by-Step Process for Evaluating a Flip:
- Find the Deal: Use platforms like MLS, foreclosure auctions, or network with wholesalers.
- Run the Numbers: The 70% Rule is a good starting point. It suggests that you should aim to pay no more than 70% of the ARV (after-repair value), minus repair costs.
- Example: If the ARV is $300,000 and repairs cost $50,000, you should pay no more than $160,000 for the property. ($300,000 * 0.70 = $210,000 – $50,000 = $160,000).
- Walk the Property: Check for structural issues, roof condition, foundation, HVAC, and plumbing. Focus on the big-ticket items and estimate costs.
- Financing: Whether it's private money, hard money loans, or a traditional lender, make sure your financing is lined up. Factor in carrying costs (utilities, taxes, insurance).
2. Permits and LLCs for Contractors:
- Your associates/relatives don't necessarily need to create an LLC to perform renovations. As long as they pull the proper permits and are licensed contractors (if required in your state), they can legally work on the property. Forming an LLC might give them liability protection and a more formal business structure, but it's not essential.
3. Return on Investment (ROI):
- A good ROI on a fix-and-flip can vary by market, but a typical target is around 10-15% of the ARV after all costs (purchase price, repairs, carrying costs, and selling expenses). This can fluctuate depending on local market conditions and the scope of the flip.
4. Using Tools Like BiggerPockets:
- BiggerPockets has great "premium" calculators, but if you're comfortable with spreadsheets, you can create your own analysis template. You’ll want it to include:
- Purchase price
- Estimated repair costs (line item)
- ARV (after-repair value)
- Financing costs (interest, points, etc.)
- Holding costs (taxes, insurance, utilities)
- Selling costs (agent commissions, closing costs)
- Profit margin
5. Spreadsheets/Templates:
- If you don’t want to start from scratch, sites like BiggerPockets and others have pre-built templates you can use to run your numbers and track your expenses. I’d suggest starting there, or if you’re comfortable with Excel or Google Sheets, customizing a simple flip analysis template yourself.
Final Thought:
Since this is your first flip, starting with a modest project can help you learn the ropes without risking too much capital. It’s easy to underestimate renovation costs and timelines, so always build in a cushion for unexpected expenses.
Good luck with your first flip, and feel free to reach out if you need more detailed guidance along the way!
17 Replies
- Lender · Houston, TX · Member since 2024 · 3 posts · 1 vote2y
Joseph -
Are your 3 associates licensed GCs? That will be an important piece to this depending on how you plan to source your capital. If you plan on going the hard money route, most lenders will require an experienced, licensed GC to complete the rehab portion.
Do you have the option to bring on an experienced partner for your first that can show you the ropes? It may be worth joining your local REIA or find some REI networking events in your area to connect with other flippers.Good luck!
- 2yNoah WrightBusiness MemberUSA, Nationwide · Member since 2024 · 174 posts · 90 votes
Quote from @Joseph Kirk:
I am looking to get into doing fix & flips. I currently have 3 rental properties and now want to move on into fix and flip...
Joseph, it's great that you're looking to expand into fix and flips, and having three rental properties already gives you a solid foundation. Here are some key tips and insights for getting started:
1. Step-by-Step Process for Evaluating a Flip:
- Find the Deal: Use platforms like MLS, foreclosure auctions, or network with wholesalers.
- Run the Numbers: The 70% Rule is a good starting point. It suggests that you should aim to pay no more than 70% of the ARV (after-repair value), minus repair costs.
- Example: If the ARV is $300,000 and repairs cost $50,000, you should pay no more than $160,000 for the property. ($300,000 * 0.70 = $210,000 – $50,000 = $160,000).
- Walk the Property: Check for structural issues, roof condition, foundation, HVAC, and plumbing. Focus on the big-ticket items and estimate costs.
- Financing: Whether it's private money, hard money loans, or a traditional lender, make sure your financing is lined up. Factor in carrying costs (utilities, taxes, insurance).
2. Permits and LLCs for Contractors:
- Your associates/relatives don't necessarily need to create an LLC to perform renovations. As long as they pull the proper permits and are licensed contractors (if required in your state), they can legally work on the property. Forming an LLC might give them liability protection and a more formal business structure, but it's not essential.
3. Return on Investment (ROI):
- A good ROI on a fix-and-flip can vary by market, but a typical target is around 10-15% of the ARV after all costs (purchase price, repairs, carrying costs, and selling expenses). This can fluctuate depending on local market conditions and the scope of the flip.
4. Using Tools Like BiggerPockets:
- BiggerPockets has great "premium" calculators, but if you're comfortable with spreadsheets, you can create your own analysis template. You’ll want it to include:
- Purchase price
- Estimated repair costs (line item)
- ARV (after-repair value)
- Financing costs (interest, points, etc.)
- Holding costs (taxes, insurance, utilities)
- Selling costs (agent commissions, closing costs)
- Profit margin
5. Spreadsheets/Templates:
- If you don’t want to start from scratch, sites like BiggerPockets and others have pre-built templates you can use to run your numbers and track your expenses. I’d suggest starting there, or if you’re comfortable with Excel or Google Sheets, customizing a simple flip analysis template yourself.
Final Thought:
Since this is your first flip, starting with a modest project can help you learn the ropes without risking too much capital. It’s easy to underestimate renovation costs and timelines, so always build in a cushion for unexpected expenses.
Good luck with your first flip, and feel free to reach out if you need more detailed guidance along the way!
- Member since 2024 · 1k+ posts · 351 votes2y
@Noah Wright thanks for the great info, you have a sample template which you recommend?
- Member since 2023 · 41 posts · 17 votes2yHi Jonah, no the 3 associates are not licensed GCs. It’s my brother and 2 good friends that have some experience. the money lender would be a family member of mine lending out of their self directed IRA so they will be lenient with us. My brother has flipped 4 houses so I would say he would be a main source of help for this first one. I definitely need to check out local real estate networking groups.
Quote from @Jonah Tijerina:
Joseph -
Are your 3 associates licensed GCs? That will be an important piece to this depending on how you plan to source your capital. If you plan on going the hard money route, most lenders will require an experienced, licensed GC to complete the rehab portion.
Do you have the option to bring on an experienced partner for your first that can show you the ropes? It may be worth joining your local REIA or find some REI networking events in your area to connect with other flippers.Good luck!
- Member since 2023 · 41 posts · 17 votes2yNoah, thank you for this great feedback. Insanely appreciated man!
Quote from @Noah Wright:
No, but here are some ways to increase ARV most dramatically:
1. Kitchen Remodel
- The kitchen is often the focal point of the home. Upgrading countertops to granite or quartz, installing high-end appliances, modern cabinetry, and stylish fixtures can significantly raise ARV. Open-concept kitchen designs are also highly desirable.
2. Bathroom Remodel
- A modernized bathroom with new vanities, high-end fixtures, tile work, and updated plumbing features can greatly increase a home's value. Adding additional bathrooms (like a master ensuite) can be a game-changer.
3. Adding Square Footage
- Increasing the usable living space of a home, such as by finishing a basement, converting an attic, or adding extensions, can dramatically raise the ARV. Larger homes typically command higher prices.
4. Curb Appeal
- First impressions are crucial. Landscaping upgrades, exterior painting, new siding, a new roof, and upgraded front doors and windows can dramatically increase ARV by improving the home's exterior appearance.
5. Energy Efficiency Improvements
- Installing energy-efficient windows, doors, insulation, and HVAC systems can appeal to modern buyers who want to reduce utility bills. Solar panels are also increasingly popular, especially in states like California.
6. Open Floor Plan
- Knocking down non-structural walls to create an open floor plan can make a home feel larger and more modern. Open floor plans are highly attractive to many buyers, especially in the mid-to-high-end markets.
7. Smart Home Features
- Adding smart home technology like thermostats, security systems, and lighting controls can increase a property's appeal and value, especially for younger buyers.
8. Upgrading Floors
- Replacing old carpets with hardwood, luxury vinyl plank (LVP), or tile flooring adds a modern touch and boosts ARV. Hardwood floors, in particular, are highly desirable.
9. Garage or Carport Addition
- Adding or upgrading a garage, or building a carport, can add significant value to a property, particularly in areas where parking is scarce.
10. Converting Spaces
- Converting unused spaces like garages or basements into living areas, home offices, or rental units (such as an ADU – Accessory Dwelling Unit) can significantly boost the value of a property.
11. Upgraded Fixtures and Lighting
- Replacing outdated light fixtures with modern, stylish ones, and ensuring proper lighting design (recessed lighting, dimmers, etc.) throughout the home can give it a more luxurious and contemporary feel.
12. Exterior Deck or Patio
- Adding an outdoor living space like a deck or patio extends the usable living area and enhances the home's appeal, especially in regions with warm weather.
In addition to these improvements, understanding the local real estate market and focusing on upgrades that align with buyer preferences in that area is crucial for maximizing ARV.
- Rocklin, CA · Member since 2021 · 5 posts · 1 vote2y
This is good information, I also have a goal of doing my first flip in 2025. I've sold my real estate and focusing on flips outside of California. There is a lot of information available but I believe there are a few gaps I need. LLC in the state of operating? Attorney? Permits?
All this information is great
- 2yNoah WrightBusiness MemberUSA, Nationwide · Member since 2024 · 174 posts · 90 votes
Quote from @Drew Goodrow:
This is good information, I also have a goal of doing my first flip in 2025. I've sold my real estate and focusing on flips outside of California. There is a lot of information available but I believe there are a few gaps I need. LLC in the state of operating? Attorney? Permits?
All this information is great
Thanks for chiming in, Drew! It sounds like you're doing great research ahead of your first flip. Yes, it's crucial to get the right structure in place—setting up an LLC in the state where you're operating can offer liability protection. And consulting with a local attorney to ensure compliance with state-specific real estate laws, plus making sure you have the necessary permits, is a smart move.
As you start, also look into state-specific rules regarding contractors and renovations, especially if you plan to flip in different states from where you reside. Best of luck on your 2025 goal—sounds like you’re on a great path!
What locations are on your radar? - Specialist · NJ · Member since 2022 · 1k+ posts · 653 votes2y
So the major issues in a house are a foundation issue or a structural issue, the next tier down would be a mechanical issue like Electrical, Plumbing, HVAC, then roof - which isn;t an issue a new roof is very common in a fix n flip, and then the outside facade: Brick repair, driveway repair, brick pointing. Everything else is just normal cosmetic, interior finishing. Expect to remodel kitchen and baths and put new floors down, paint, knock down a wall to open the floor plan. These are all expected.
I can send you a rehab template to look at if you'd like.
Your most important number is going to be your ARV. That exit number is what the max project cost number and the profit are based upon.
Use this formula as part of your analysis: (rehab budget + purchase price)/ARV < 72.5%
- Member since 2023 · 32 posts · 21 votes2y
I have not seen any deals with this much spread like rehab+pp/.75, is this still valid and expected, because I have not come across any in this range
- 2yShannon MogilinskiPro MemberInvestor · Chicago Suburbs · Member since 2021 · 48 posts · 37 votes
Quote from @Rajagopalarao Paidi:
I have not seen any deals with this much spread like rehab+pp/.75, is this still valid and expected, because I have not come across any in this range
Hey Rajagopalaroa--Agreed--I don't use the 75% rule. Mainly because if I used that metric alone I would not have done my last 10 successful flips. I analyze intensely the ARV price points in my target markets for at least 9 months before I buy. Good neighborhoods, excellent schools, and literally--where does the house I want sit in the actual neighborhood...I say does it look like a $650K house area when I'm done? for eg. I'll look at 40-65 homes a month when I am buying. I do low ball don't get me wrong. But I do not buy bottom barrel properties in bad locations (busy roads, crime, eye-sore views) instead I focus on making a property one that the average modern family will want. We design our homes. We move fast and we permit. Yes we ask towards the top of the market, but I anticipate my holding times (which are in line as the short supply in my area is able to work for me) and build that in. Flipping well requires pivoting and agility. That's a glimpse of how I do it. Good neighborhoods & good products. Stong homes=Strong buyers. Maybe it will work for others. Let me know how you do it!!
- Rocklin, CA · Member since 2021 · 5 posts · 1 vote2y
Quote from @Noah Wright:
Quote from @Drew Goodrow:
This is good information, I also have a goal of doing my first flip in 2025. I've sold my real estate and focusing on flips outside of California. There is a lot of information available but I believe there are a few gaps I need. LLC in the state of operating? Attorney? Permits?
All this information is great
Thanks for chiming in, Drew! It sounds like you're doing great research ahead of your first flip. Yes, it's crucial to get the right structure in place—setting up an LLC in the state where you're operating can offer liability protection. And consulting with a local attorney to ensure compliance with state-specific real estate laws, plus making sure you have the necessary permits, is a smart move.
As you start, also look into state-specific rules regarding contractors and renovations, especially if you plan to flip in different states from where you reside. Best of luck on your 2025 goal—sounds like you’re on a great path!
What locations are on your radar?Thank you Noah,
I am exploring AZ, TX, OH, FL may have some opportunities based on the hurricanes that have hit recently.
- 2yNoah WrightBusiness MemberUSA, Nationwide · Member since 2024 · 174 posts · 90 votes
Quote from @Drew Goodrow:
Quote from @Noah Wright:
Quote from @Drew Goodrow:
I am exploring AZ, TX, OH, FL may have some opportunities based on the hurricanes that have hit recently.
Hey Drew,
It sounds like you’ve got a solid strategy in motion. Exploring AZ, TX, OH, and FL makes a lot of sense—those markets are active, and Florida, in particular, could offer unique opportunities with properties affected by recent hurricanes. There’s definitely potential in finding distressed assets and adding value through smart renovations.
Setting up an LLC in the state where you're flipping is a great move for liability protection, and working with a local attorney will ensure you're covered on state-specific legalities. Permits can vary widely by location, so having a reliable contractor network will help streamline that part of the process.
Also, don’t forget to factor in things like insurance, especially in hurricane-prone areas. I’d recommend building relationships with agents and accountants familiar with these markets too—state-specific tax strategies could make a big difference in your bottom line.
I’m excited to see how this plays out for you! Keep me posted on your progress, and if you need any brainstorming along the way, feel free to reach out. 2025 is going to be a great year for your first flip!
Best of luck,
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
dont over think this its not that complicated.
important issues are.
1. cost of capital
2. knowing what a deal is or is not.
3. good reno crew or contractor
4. good agent that will tell you straight what its worth when done and what level you should rehab to.
5. a market that is actually moving
napkin math works trying to drill down to decimal points does not. U will never hit the numbers ever in renovations as there is no way to know the unknown.. just make sure there is plenty of margin above you all in price and cost of capital.
- Albuquerque, NM · Member since 2017 · 81 posts · 13 votes1yTo get started with fix and flips, first define your criteria, including location, property type, and budget. Look for distressed properties through online platforms or local agents. Analyze potential deals by estimating the After Repair Value (ARV), repair costs, and total expenses.
Quote from @Joseph Kirk:
I am looking to get into doing fix & flips. I currently have 3 rental properties and now want to move on into fix and flip.
I have 3 associates / relatives that would be doing my renovations, as I would be finding, analyzing, and purchasing the deals.
I have never done a fix & flip. I’ve only ever done renovations for my rentals or primary home.
Looking for any and all advice for a beginner here. Do you have a step by step list when looking at the potential house? Do you use bigger pockets tool? Do my 3 associates need to create a LLC to be able to do these renovations or can any individual do them, as long as proper permits are pulled? What's considered a good ROI for fix and flips? Does anyone have a template/spreadsheet of anything? Anything is appreciated.
Prioritize renovations that add value and create a timeline for the project. Ensure you understand local regulations regarding permits; it’s usually a good idea for your associates to form an LLC for liability protection, but individuals can do renovations as long as they pull the necessary permits. Utilize tools like BiggerPockets for resources and calculators, and consider creating a simple spreadsheet to track property details, budgets, and timelines. Finally, network with other investors and start small to gain experience. Good luck! - 1yPeter MckernanBusiness MemberResidential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
How is it coming along? Did you get started after this post and how is the success?
I believe Noah set you up right on that post! I would add to this one pound into you the good relationships you have with the contractors and agents in your area will be your best and most helpful relationships. The contractor will give you better pricing the more you use them, some GCs increase their price, but those are the ones you would like to not use (side note, of course with inflation you need to pay your people right, but it needs to be reasonable). The other tip I would say is really get a good relationship going with a realtor in the area if you do not have one to give you the exact data you are looking for to be successful. That data would be sales price after remodel (the true numbers some agents really don't have the experience to be comping the property), the days on market you will experience (this is great info because you want to recycle the money quickly), and resources to sell the place fast not slowly which you do not want this because this could put your holding costs extremely high and push the property to little profit or no profit.
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