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Hard Money Lender Investors

New to Fix and Flip? 4 Tips to Ensure a Smooth Start

Posted by Ken Meyer on Tue, Oct 10, 2017

 fix and flip lendersStarting your own fix and flip business is an exciting yet daunting process and it can feel overwhelming sometimes. At Trust Deed Capital, we want to make sure that your fix and flip business succeeds and makes incredible profits. So, here are four tips, gleaned from the helpful advice of professional house flipper Justin Williams, to ensure a smooth start to your fix and flip project.

Figure out the After Repair Value

This step is vital for you to understand if a property is worth your time and money to fix and flip. The after repair value (ARV) will tell you how much the property will be worth when all the fixes are complete. Make sure you check the comps, which means properties that have sold or are in the process of selling that are similar to your own, in the area of the property to decide how much your property will be worth when the repairs and upgrades are complete. This will help you decide if the cost of the property + cost of labor + cost of materials + cost of time = large profits.

Determine Repair Costs

In time, you can figure out the estimated cost of repairs on your own by merely looking at the property. But when you are just starting out, it is best to bring a contractor with you and we recommend two or three different quotes. Go with the one that works best for you, but make sure you do your research about the contractor first. Look at reviews of other customers who have worked with him or her and if possible check out other projects they have completed. If your cost of repairs is more than the estimated value of the property, drop the property and keep looking. On average, you only want to spend about $20 per square foot. Much more than that and you will lose too much money.

Remember Closing and Holding Costs

Your costs for your fix and flip aren’t just based on purchasing the property and making repairs. Holding costs include things like property taxes, insurance, utilities and maintenance. These are monthly expenses and depending on how long it takes to sell the property, will add up very quickly.

You must also consider your purchase and selling closing costs. For your purchase closing cost, you should calculate about 0.5 percent of the purchase price. And for selling closing cost, if you are using an agent you can expect a 5-6 percent commission for him or her, and other costs such as title, escrow or attorney fees.

Decide on Your Offer

The easiest formula for determining your offer price is this: ARV – Repair Costs – Closing/Holding Costs – Desired Profit = Your Asking Price. In simpler terms, take the price you expect to sell the property and minus all costs and expenses and how much profit you feel you need to make it worth your while. Then you offer the remaining price.


If you want to start your fix and flip business, contact us today at Trust Deed Capital and we will help you build the business you need to succeed!


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