Interview: This is what it’s all about!

To successfuly complete a Fix & Flip project, the ultimate goal is to make a profit. The basic idea of Fix & Flip is to increase the value of a property. You buy a cheap but lucrative property, add value to it yourself and sell it at the end for a profit. This means you have to work cost-efficiently to keep your expenses low and thus increase the profit.

We conduct the interview with Immobilien-Erfahrung.de (in conversation “IE”). We talk in the interview about:

• The purchase and finding of lucrative properties
• Saving costs when upgrading and renovating
• The profitable sale of the object
• Bonus topics such as taxes, legal forms and financing

What is Fix & Flip?

FIV: Let’s start with the basics. Can you start by explaining what Fix & Flip is and how it works?

IE: Of course! Fix & Flip is a strategy or even method from the real estate world that focuses specifically on trading real estate. That is, unlike traditional real estate strategies where properties are held to generate long-term returns, Fix & Flip actively trades properties. The core aspect is to increase the value of real estate in order to generate profit when trading. The increase in value is achieved through cost-effective upgrading and renovation.

So the strategy consists of three basic steps – buying, upgrading and selling.

Fix & Flip Find & Buy Property

FIV: We have already talked about Fix & Flip in one of our articles and have shed some light on the three steps. Surely we could not clarify everything there what an expert with experience can report about it. Let’s go through the three steps again and see what you can tell us. Let’s start with the first step – the purchase.

IE: Yes, with pleasure. Getting started is the biggest difficulty! In order to start trading real estate at all, you need real estate. So the first step is all about acquiring real estate. This is also one of the most complicated parts of Fix & Flip. First of all, you need to create and work through a criteria checklist when searching for the perfect property.

Criteria for the selection of Fix & Flip real estate

IE: The checklist for the real estate search should include important key data that are important to you as a flipper. Basically, the location and the condition are the basis for the decision.

The property must be in an advantageous location for you. Advantageous in the sense that it is an attractive area for future buyers – so it can be sold quickly – and is still in an affordable location for you. A-locations are not advantageous, since city centers, for example, are not worthwhile in terms of price. B-locations or developing C-locations are much more suitable.

In addition, the condition of the property must be considered. Since the focus is on “cheap” properties, these often also harbor problems. This is fine to a certain extent, of course, as the strategy involves “fixing” after all, but it should still not be overestimated.

With the Fix & Flip it is important to avoid sanitation!

These are too costly and time-consuming. The building fabric of your object should therefore basically be in tact.

FIV: With the basic criteria in mind – where is the best place to look for real estate?

Search & buy objects: How do I proceed?

IE: Online portals provide a solid basis for the search. Here, offers in the corresponding location can be found and compared with each other. So you get a rough picture and an idea of the price. However, I would rather use the online portals for research and not for the purchase.

You get the better buying options privately through off-market properties. Ideally, you already have a network of people who will contact you as soon as they hear about a sale. If you don’t have that, you have to look for the personal contact yourself. Either you show yourself, for example through marketing and let customers come to you, or you take the initiative and approach customers personally.

To explain this now would go beyond the scope of this article.

FIV: Okay good. We’ll summarize the first step again:

• Checklist with criteria for the property
• Location & condition of the object are important
• Avoid objects in need of renovation
• Use online portals for research
• Off-market real estate from private contact

What would come next? The upgrade?

IE: I would talk briefly beforehand about financing options for the purchase.

Fix & Flip financing: which loan is suitable?

Just recently I talked to one of our partners about an interesting topic and that is Fix & Flip without equity. In order to run Fix & Flip without equity, you need outside capital. The debt capital is provided through loans and credits. In discussing which type of loan was best, I first realized how important the question of financing is in the first place.

Therefore, I wanted to briefly list the most important points again.

The funding can be divided into two areas

The financing of the property itself and the financing of the renovation process. Both areas can be financed individually but also in combination. This is decided according to one’s own ideas. There are different types of loans for both options.

Credit types at a glance

To finance the entire project, in principle, all conventional loans can be used. Hard money loans are particularly suitable for the purchase of the property. These are based only on the value of the property, not on the equity.

There are several good financing options for upgrading. Small loans are the simplest solutions. But credit lines are more interesting! These give in principle a budget from which you can take what you need. Accordingly, only the interest is paid and repaid what is consumed.

FIV: I’ll hold on again:

• Purchase financing
• Renovation financing
• Separate or combined
• Regular loans
• Hard Money Loans
• Small loans
• Credit lines

With funding out of the way, there’s not much standing in the way of the upgrading process right?

Upgrading real estate: saving costs & increasing value

IE: Yes, that’s right. Since the process of upgrading is very detailed, I’ll try to be brief and mention only the most important things. We also have complete explanations and articles on our site.

Simply put, this step is about the actual value creation and thus the generation of profit. Here, the property, which is unattractive for the end users, is made attractive. This is achieved through cost-effective renovation measures.

Cost effective is the saying here!

Care must be taken to increase the value effectively without great expense. As already mentioned, extensive renovations are not advantageous.

The best way to increase the value of the property is to replace the flooring, kitchen and plumbing fixtures, new windows and doors, and garden and patio maintenance.

Those who are not skilled in handicrafts will find the best help and advice from craftsmen.

FIV: So the areas where renovation can be effective are:

• Flooring
• Bath
• Kitchen
• Windows
• Doors
• Garden
• Terrace

After upgrading, is the property then ready for sale?

Fix & Flip sale: exposé, offers & home staging

IE: In principle, yes! Already during the revaluation process, an appraiser can start valuing the property. This gives you an approximate idea of the selling price at an early stage. In addition, the preparation of the exposé can also be started promptly and the listing subsequently published.

For the creation there is one more crucial trick – home staging!

FIV: What exactly is it?

Home staging to prepare the display

Home staging is a simple trick to make the living space look more attractive for the pictures of the exposé. In the process, the rooms are made to look alive. For this purpose, no real furniture is used, but specially made cardboard furniture. This saves energy and costs for a “move”.

As soon as the exposé goes on the market you wait!

And when you’ve received enough offers, you compare them and negotiate if necessary to get an even better price.

After the selection of the buyer then follows only the notary appointment and the transfer of ownership.

Finally, the profit can be calculated. For visualization there is the Fix & Flip calculator on our site.

FIV: The sales process is now over. What happens to the profit? Surely it has to be taxed?

Fix & Flip Taxes: How much profit am I left with?

IE: Absolutely correct. Of course, taxes are due on fix & flip profits, just like anything else. What taxes and especially how much depends on the legal form you traded in.

As an individual or sole proprietor, regular income tax must be paid. Depending on how high your profit was in the end is assigned to a certain tax rate.

These tax rates are recorded in the tax progression.

If you plan to operate Fix & Flip for a longer period of time, it is worthwhile to establish a limited liability company. This requires a share capital of 25,000 euros, but you save a lot of taxes. In addition, your own capital is no longer liable but only the company limited to the paid-in capital.

As a GmbH, you then only pay corporate income tax of around 15% and trade tax of 3.5%.

I have now only given rough key data on taxation. Of course, the topic can be further elaborated.

If you want to know more about it, please visit our Fix & Flip guide. Among other things, I can recommend the articles Fix & Flip Taxes, Property Appreciation and Fix & Flip Sales.

FIV: Thanks so much for your time and insights into the Fix & Flip strategy!

IE: Gladly!

Summary: 10 Learnings about Fix & Flip

Let’s briefly summarize the most important points once again.

	Learning Fix & Flip
1	The basic idea of Fix & Flip is to increase the value of properties
2	The 3 steps of Fix & Flip: Buy, Upgrade & Sell
3	Checklist for the real estate search: consider location & condition
4	Find & buy objects via online portals & private contacts
5	Finance project & find suitable financing type
6	Cost-effective upgrading & renovation
7	Avoid objects in need of renovation
8	Have property valued & create exposé
9	Exposé prepared by home staging
10	Settle contract, transfer property & calculate profit (pay attention to taxes)

What is Fix & Flip?

The Fix & Flip strategy refers to buying, upgrading and selling real estate within a short period of time with the goal of making a profit.

The process begins with finding an undervalued property to buy and renovate. After the upgrading measures are completed, the property is sold on the market at a higher price.

So Fix & Flip is:

• Buy a cheap property
• Upgrade them cost-effectively
• Sell profitably

Buy Fix & Flip property

The first step in implementing a fix & flip strategy is to find and purchase a suitable property. Remember to do a thorough assessment of the building’s fabric to understand what kind of renovations are needed to increase the property’s value and get a realistic estimate of the selling price.

Here are some tips that can help you with this process.

Search undervalued real estate

These can be properties that are in poor condition or whose owners need to sell them quickly. Nevertheless, when choosing a property, pay attention to its location. The location is decisive for the subsequent selling price.

Use of online platforms

There are many online platforms that make it easier to find suitable properties, such as social media platforms or apps and online markets. Also, private contacts can be an ideal way to find lucrative properties for the fix & flip strategy.

Build a network: Brokers, craftsmen & Co.

Making contacts with brokers, craftsmen and other professionals in the real estate sector is very helpful to be informed about possible offers. Here you can simply use online platforms or contact private individuals.

Maybe your uncle knows someone who has renovated a bathroom cheaply before.

Secure funding & capital

Make sure you have enough capital to renovate and sell the property you buy. Many fix & flip projects fail due to insufficient capital. Generous planning of costs and financial resources is therefore very important.

Fix & Flip offers the possibility to finance them. You can find out how that works here:

• Fix & Flip Financing

After the purchase of the property comes the important step of upgrading.

Fix & Flip property upgrade

Upgrading the real estate is the real work. Here you must pay attention to a detailed planning of the work. With the planning you can better estimate expenses for costs and time. The goal of the revaluation is to increase the value of the property by effective measures, in order to achieve profit. With redevelopment, renovation and modernization measures, these goals can be achieved.

In the following article, you will find out exactly what you need to pay attention to, what work is involved and what costs you will incur:

• Fix & Flip property upgrade

Fix & Flip property for sale

The last step after upgrading the property is selling it. This step ultimately leads to your profit, which is why it is important to choose the right approach here.

First, you should have your property appraised by an expert, such as architects or realtors. They will give you a range in which you can set your selling price.

You can see how such a profit calculation looks like in this article:

• Fix & Flip Cost Accounting

Also interesting! Fix & Flip taxes differ depending on the legal form chosen.

Conclusion. Fix & Flip & Capital Increase

If you find a cheap property, the Fix & Flip strategy is a profitable way to invest in real estate. However, you must keep in mind that the strategy can also be associated with risks, such as unforeseen renovation costs or difficulties in selling the property.

High risk but high reward

In summary, the Fix & Flip strategy, when executed efficiently, contributes quickly and effectively to your capital increase. You must make sure that you are well prepared and understand the risks before starting with this strategy.

For detailed information, check out our partners’ Fix & Flip guide:

• Fix & Flip Real Estate