What is flipping?

Flipping — often written fix and flip — is buying a property with the intention of renovating it and reselling it rather than keeping it. The investor takes title, pays for the work, holds the property while it is being done, and then puts it back on the market. The whole cycle is usually measured in months rather than years.

The defining feature is ownership. A flipper is a principal: they sign as the buyer, the deed goes into their name or their entity's name, and every cost between the two closings is theirs. That is what separates flipping from wholesaling, where the wholesaler assigns a purchase contract to somebody else and never takes title at all.

Because the flipper owns the property, they also carry the outcome. If the renovation costs more than planned, or the property takes longer to resell than planned, those are the flipper's costs. Nothing about the strategy guarantees a result, and no page on this site states what any flip produces.

Acquisition. The investor finds a property that needs work and puts it under contract. Sources include the MLS, auctions, direct-to-owner marketing, and off-market channels such as wholesalers and disposition teams — which is the supply this marketplace publishes.

Renovation. The investor builds a scope of work — a line-item list of what will be repaired or replaced, by room and by system — prices it, hires the trades, and manages the schedule. The scope is where most of the variance in a flip lives, because it is the part that is estimated rather than known.

Carrying. While the work is under way, the property costs money to hold: loan interest if the purchase was financed, property taxes, insurance, utilities, and any association dues. These are called holding or carrying costs, and they accrue whether or not anybody is on site that week.

Resale. The finished property is marketed and sold. Selling costs — commissions or fees, closing costs, and whatever concessions the sale requires — come out of the resale price, and what remains after every earlier stage is the project's result.

The two figures a flipper needs before anything else are the ARV — the after-repair value, an estimate of what the property would sell for once the work is done — and the repair estimate. Both are opinions. An ARV is built from comparable sales of similar finished properties, and a repair number from a walkthrough, a contractor's bid, or a line-item budget.

Most practitioners run a first-pass screen from those two numbers before spending any real time on a property. The 70% rule is the best known of them: ARV times a multiplier, minus repairs, giving a ceiling on what the investor will offer. It is a filter that describes the buyer's own cost structure, not a valuation of the property, and different investors screen at different multipliers because their costs and their required margin differ.

A property that passes the screen then gets a full underwrite: a real scope of work, real financing terms, a real holding period, and real selling costs. The screen exists to decide what is worth underwriting, and experienced operators re-underwrite every deal that survives it rather than treating the screen as the answer.

The figures below are invented round numbers for illustration. They describe no real property, no real market and no listing on this site.

An investor buys a house for $120,000 and budgets $35,000 of work. They finance the purchase, so they pay interest for the months the project runs, and they also pay taxes, insurance and utilities across that period — say $9,000 of holding costs in total. Closing costs on the way in are $3,000.

When the work is done they list the house. If it sells for $210,000, the costs of selling — commission, closing costs and concessions — come off that figure before anything else does; say $15,000. Subtracting the purchase, the renovation, the holding, the buying costs and the selling costs from the resale price is what produces the project's result, and every one of those five inputs was an estimate on the day the property was bought.

Changing one input changes the answer. A renovation that runs $12,000 over, a resale that takes four extra months, or a sale price $15,000 under the ARV each move the result on their own, and they are not independent — a project that runs long usually runs long because the scope grew.

It is not wholesaling. A wholesaler puts a property under contract and assigns that contract to an end buyer, earning an assignment fee; they never own the property, never pay for a renovation, and never carry it. A flipper does all three. The two strategies frequently meet — a great many flips are bought from wholesalers — but they are different positions in the same transaction.

It is not the BRRRR strategy. BRRRR — buy, rehab, rent, refinance, repeat — shares the first two stages and then keeps the property as a rental instead of reselling it, pulling capital back out through a refinance. A flip ends at the resale; a BRRRR ends with the investor still owning the house.

It is not a valuation method, and an ARV is not a market price. An ARV is an estimate of what a property might sell for after work that has not been done yet, made by the person who is deciding whether to buy it. Nothing on this site states what any property is worth, and no figure published here is a valuation.