Fixing and flipping means buying a distressed property below market, renovating it, and reselling at its after-repair value for a profit. It's the second rung on the come-up ladder — bigger paydays than wholesaling, but real money and real risk. Here's the beginner's map.
This is education, not investment advice.
The flip in five steps
- Find a discounted, distressed property — off-market sources give you the margin (see Finding Off-Market Deals).
- Analyze the numbers — ARV, repair estimate, and your maximum offer via the 70% rule.
- Fund the purchase + rehab — often hard or private money.
- Renovate — on budget, on schedule, to a sellable standard.
- Sell — list on-market at ARV and net the profit.
The numbers that decide everything
Flipping profit isn't the sale price minus the purchase price. It's the sale price minus all of this:
- Purchase price
- Repair costs (see How to Estimate Rehab Costs)
- Holding costs — loan interest, taxes, insurance, utilities while you own it
- Transaction costs — closing costs on both ends + agent commissions on the resale
That's why the 70% rule exists: MAO = (ARV × 0.70) − repairs. The 30% cushion is meant to absorb holding + transaction costs and still leave profit. As Rocket Mortgage stresses, the discipline is being conservative on both ARV and repairs — optimism is how flips lose money.
Funding a first flip
You need capital for purchase and rehab. Common beginner routes:
- Hard money — asset-based, fast, finances much of purchase + rehab, but high interest/points and short terms.
- Private money — an individual lender at negotiated terms.
- Partnering — you bring the deal + sweat, a partner brings the cash, you split.
See How to Fund Your First Deal With No Money Down for the full menu and the honest costs.
The mistakes that sink first flips
- Optimistic ARV or repair numbers. The #1 killer. Pad your repair budget for surprises.
- Underestimating holding costs. Every extra month of interest, taxes, and utilities eats profit. Time is money — literally.
- Over-improving for the neighborhood. Don't put luxury finishes in a mid-market block; you won't get it back at resale.
- No exit cushion. If the market softens or the rehab overruns, thin margins turn into losses.
- Managing the rehab blind. Vet contractors, get written scopes and bids, and inspect the work.
Is flipping right for you?
Flipping is active income — it's a job, not passive wealth. It rewards project-management discipline and conservative math. Many investors flip to generate the capital that funds rentals via BRRRR — turning active dollars into passive ones.
The come-up move
A flip is won at the buy and the budget, not the sale. Nail conservative ARV + repair numbers, respect holding costs, and pick a project you can actually manage.
Start free on Squatters to run flip numbers on real off-market properties before you risk a dollar. Squat it. Fund it. Own it. 🦝