In the Fix and Flip business model the entrepreneur looks for beat-up properties for cheap so that they can remodel the property and put it back on the retail market so that a retail buyer will get a loan and buy the property for full market value.
This is a good business model that will always be needed and serves the community by making neighborhoods better because the properties are staying clean and attracting quality neighbors. They also increase the value of Real Estate because a fresh, clean, and modern property sells for more money than the property down the street which is in average condition.
This business model does not require experience but is highly recommended. You can get experience by offering a local investor your time to help with business tasks in exchange for an education. Another good option is to get formal education from a Real Estate guru. They sell books and tapes to teach how to do this business from A to Z. You can go to Amazon.com, Borders, the library, search on the internet, or ask another investor for a reference to some good training material.
Contrary to popular belief, the best way to make the most amount of money in Fixing up Real Estate and flipping for a profit, is to look for properties that have mold, fire damage, foundation issues, or any other major problem. 99% of your competition is gone when you find a property like this. Most people are too scared to tackle a project like this. They think there is too much risk.
Do you want to know how to overcome this fear? Do a good job of finding the best contractors. If you have 3 top-notch, expert contractors give you a bid on a major project like this, you will have a very good idea as to what the cost will really be. Just make sure that they specialize in this kind of a job. Once you have a good idea of the cost and you decide to buy the property, guess what you do next! Write a check. That is the difference between a highly profitable deal and an average one.
I have seen investor after investor buy properties that are beat up from the MLS (Realtor’s database of listings) and make 5-10k per deal and tell me that they are happy with the lower profit because it will even out for the guy who makes more per deal but fails miserably on one. While that is true, it makes more sense to play this game smart.
Get experts on your side, do your due diligence, and make more money. Some investors look to make $100,000 per deal. The ones that I know are making 7 figure incomes year after year, do not look for slam dunk deals, they look for bread and butter deals. They run into the slam dunk deals and make over 100k on a deal from time to time, but really are after any deal that makes sense.
Cost to get started: If you have a bunch of money liquid, it will cost you the price of the house plus repairs. If you don’t have any money to play with, you can still do this with zero down but you will have to get educated. This process is more specific than the others and will require that you use OPM (other people’s money).
In order to do this business properly you also need to get educated on managing other people’s money so that you do not goof up and lose someone else’s retirement funds. If you want to go zero down, expect to spend a few thousand on seminars, books and tapes, etc.
How much time will it take to start making money: Usually between 6 months to 1 year
Income Potential: Unlimited
You were probably privy to this business model and I didn’t need to tell you how it works, but the important thing to realize is that each business model is its’ own entity. Some people will try to wear all hats and become an expert at the whole system of Real Estate. They will be a broker, a wholesaler, a fix and flipper and some of the other business models all at the same time. It is a better idea to pick one that you can see yourself being good at and becoming an expert at it.
Once your income is where you want it to be and you have a system in place, then add another business model.
Fix and Flip is one of the parts of the process and if you can see yourself buying low, selling high, managing contractors, raising money, and cashing big checks, this may be a good fit for you.