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Fix and Flip
Buying a property below market value, renovating it, and selling it for a profit.
Definition
Fix and flip is a short-term investment strategy where an investor purchases a distressed property at a discount, renovates it, and sells it at a higher price. Success depends on accurately estimating renovation costs, managing contractors effectively, and correctly predicting the after-repair value. Typical timelines are 3-6 months from purchase to sale. Flipping is capital-intensive and carries significant risk — cost overruns, market shifts, and extended hold times can turn a profitable deal into a loss. Profits are taxed as ordinary income (short-term capital gains), making flipping less tax-efficient than buy-and-hold strategies.
Related Terms
After Repair Value (ARV)
The estimated market value of a property after planned renovations and improvements are completed.
Loan-to-Cost
The ratio of the loan amount to the total project cost including acquisition and renovation.
Capital Gains
The profit realized from selling a property for more than its original purchase price.
Value-Add
An investment strategy focused on improving a property to increase its income or value.
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