Fix. Flip. Profit?

As part of Unwritten Capital’s Housing spotlight (Housing Housing Housing), we’re highlighting themes and strategies shaping the housing market. 

One we’re particularly interested in is the Fix-and-Flip model.

Maybe you've watched those house flipping shows where someone buys a rundown property, transforms it in what seems like a weekend, and sells it for a massive profit. And you thought, "Is that actually real?"

The short answer: yes, but it's more nuanced than TV makes it look. 

Single-family fix and flip investing has been around for decades, but it's become ubiquitous in the creator economy with people talking about The BRRRR method (Buy, Renovate, Rent, Refinance, Repeat), mailbox money, and everything in between.

What exactly is Fix-and-Flip investing and why is it interesting? 

At its core, Fix-and-Flip investing means buying a (usually run-down) home, renovating it, and selling it for a profit.

Why is that interesting now?

The housing shortage is real.  The US is short millions of homes in the U.S and new construction hasn't kept pace with demand. That means move-in ready homes in desirable neighborhoods command premium prices. When you take a dated or distressed property and bring it up to modern standards, you're filling a genuine market need.

Today's buyers want homes that are move-in ready with modern finishes. They're willing to pay a premium to avoid the hassle of renovations, which is exactly what a successful flip provides.

Many homeowners who would normally sell are staying put because they locked in low mortgage rates a few years ago. This means fewer move-in ready homes on the market, creating opportunities for well-renovated properties to stand out and sell quickly.

Now back to the investing piece… 

There are two key pieces to the puzzle: underwriting and execution.

Sounds simple, right? It can be - but it usually isn’t.

Underwriting: Setting the Table

This is where you determine if a deal actually makes sense on paper. 

Key parts of underwriting include:

• After-Repair Value (ARV): What are similarly updated houses selling for? Project the sale price after fixes by looking at comparable renovated homes.

• Rehabilitation Budget: How much will the renovations cost – line by line. New roof, plumbing, paint, HVAC, landscaping, etc.

• Carry/Closing Costs: What will you need to pay just for owning the property (mortgage, utilities, taxes, insurance, etc.) and costs to transact (legal, brokerage, etc.).

• Profit: Decide how much margin you want built into the deal. Many flippers target at least a 20-30% profit margin to account for inevitable surprises.

Working backwards from ARV gets you to the price you are willing to pay for the home. 

ARV - Rehab - Carry/Closing - Profit = Maximum Purchase Price

If you are able to buy the home for that price (or less), then you are in business!

At least in your Excel model…

Execution: Turning Paper into Profit

Here’s the reality: underwriting is the easy part. Execution is where most flippers make - or lose - their money.

A few key components to executing well:

• Sourcing: Acquiring the homes at or below target purchase price from foreclosure auctions, direct retail listing, wholesalers, etc. 

• Construction: Who completes the renovation work that you’ve underwritten? Can they do the work on time and on budget? This is often the make-or-break factor.

• Disposition: How quickly can you sell the home after you finish the renovation?  How close to your projected ARV?

It all sounds straightforward when we list it out like that. A beautiful Excel business!

However, each step hides layers of operational risk. Permits can delay projects by months. Contractors ghost you mid-job. Markets cool while you’re mid-renovation. All while carrying costs quietly and quickly erode returns.

Looking at the Numbers

Now let’s walk through a real example.

Say you want to find a single family home to Fix-and-Flip. You have alerts set for new listings on the MLS. You are talking to wholesalers. You’ve even gotten a list of homes heading to foreclosure next month. 

You’ve seen 200 houses and none look like they have the potential to be repositioned. But then you find one freshly listed on the MLS you think can be a winner. 

You do your homework and find that comparable updated homes in the neighborhood are selling for $375,000. That's your ARV.

You estimate $45,000 in renovations (updated kitchen, updated bathrooms, fresh paint, new flooring, landscaping) and budget another $15,000 for carry/closing costs.

You want a $75,000 profit margin (20% of ARV) to make the project worthwhile and leave a cushion for surprises.

Using the formula:

• ARV: $375,000

• Rehab + Costs: $60,000

• Target Profit: $75,000

• Maximum Purchase Price: $240,000

If you can negotiate the purchase at $240,000 or below, you've got a viable deal. Your total investment is $300,000, and if everything goes according to plan, you sell for $375,000 and walk away with $75,000.

That's a 25% return in six months. Compare that to traditional stock market returns or savings accounts, and you can see the appeal.

Of course, the reality involves more variables - contractor delays, unexpected repairs, market shifts - but the fundamental math is what attracts investors. The key is building in enough margin that even when things don't go perfectly (and they rarely do), you still make money.

The Risk Side of the Equation

As we said, the Excel model is the easy part!

This isn't free money. Fix-and-flip investing comes with real risks that need to be understood.

Market timing matters. If you buy at the peak and the market softens while you're renovating, your profit margin will evaporate quickly. Real estate markets can shift and there is a big difference between a three month timeline and a twelve month timeline. 

Renovation costs can spiral. That $60,000 budget can become $80,000 when you discover foundation issues or outdated electrical that needs replacing. Not only that, the two month renovation period can quickly become eight months if you don't schedule your vendors perfectly or you find an unexpected issue. Experienced flippers build contingency into their budgets, but surprises still happen.

You often need material funds to close: 20-30% of the total investment. Most traditional mortgages don't work for flip properties, so investors typically use hard money loans, private lenders, or their own cash. These funding sources often come with higher interest rates and shorter terms. Many of them offer improved terms and lower equity contributions, but only after you have demonstrated a track record of performance. 

The key is understanding that your returns come from buying right, renovating smart, and hitting your timelines.

The Bottom Line

Fix-and-flips in single family homes are a real estate strategy with potentially strong returns in a shorter timeframe than others.

The current market - with its housing shortage, inventory constraints, and buyer preference for turnkey properties - creates a favorable environment for well-executed flips. 

But here's the catch: success requires market knowledge, experienced contractors, reliable deal flow, and hands-on operational expertise.

And that’s exactly why Unwritten Capital partners with the right groups for hands-on execution.

*Want to learn more about our fix-and-flip investment opportunities? Reach out to explore how Unwritten Capital can help you access this market: [email protected]