Fix and flip is a short-term, transactional investment strategy focused on buying below market value, adding value through renovation, and selling at or above ARV.
Key metrics:
- Maximum Allowable Offer (MAO): ARV × 70% − Rehab Costs
- Holding costs: Hard money interest, taxes, insurance, utilities during renovation
- Profit target: Typically 15–20%+ of ARV after all costs
Risks include: rehab cost overruns, market timing, carrying costs if the property sits, and depreciation recapture/short-term capital gains tax (if held under 1 year, profits are taxed as ordinary income).
Related Terms
ARV
After-Repair Value — estimated market value of a property after renovations are complete.
Hard Money Loan
Short-term, asset-based financing used by investors for acquisitions or rehab — typically 6–24 months.
Loan-to-Cost (LTC)
Loan amount as a percentage of total project cost (acquisition + rehab), used in construction and fix-and-flip financing.
As-Is Value
The current market value of a property in its present condition, before any repairs or improvements.