The fix-and-flip business model
A fix-and-flip investor buys a property, improves it, carries the property during the project, and then sells it. The goal is not simply to buy below market value. The deal must leave enough room for renovation costs, financing, holding costs, selling costs, surprises, and profit.
The five-part deal
Buy
Acquire the property at a price that leaves room for the entire project.
Rehab
Complete the repairs and improvements needed for the target buyer and neighborhood.
Carry
Pay financing, taxes, insurance, utilities, lawn/pool care, HOA, security, and other ownership costs while the property is held.
Sell
Market and sell the renovated property, including selling and closing expenses.
Count the real profit
Profit is what remains after every project cost — not simply ARV minus purchase price.
The basic profit picture
Costs newer flippers sometimes forget
Money costs
Interest, points, lender fees, appraisal/valuation, draw fees, extensions, and other financing expenses.
Time costs
Property taxes, insurance, utilities, maintenance, HOA, security, and extra interest if the rehab or sale takes longer.
Sale costs
Agent compensation where applicable, buyer concessions, title/escrow charges, transfer-related costs, and closing expenses.
Surprise costs
Hidden damage, permit issues, material increases, contractor changes, and repairs found after demolition.
Where funding can fit
Hard money is often used for the acquisition and rehab phase because it is designed for short-term investment projects. If the investor changes the plan and keeps the property as a rental, a long-term product such as DSCR financing may become a possible refinance path if the property and borrower qualify.
Ready to test yourself?
Take the Fix & Flip Basics Quiz and see whether you are thinking about the whole project — not just the purchase price.
Take the Fix & Flip QuizEducational information only. Every project, lender, property, market, and cost structure is different.