Is flipping a house worth the effort
fix and flip
One model has long since conquered the American market. It is also becoming increasingly popular in Germany. It's about the strategy fix and flip. There is a little risk involved, but it also promises one quick and high profit. In this detailed article, we have summarized what exactly this concept is about, how it works and what to look out for.
Table of Contents
Real estate fix and flip - what does that mean?
This is a special method among real estate investment strategies. If you want to try it, you should ideally have good knowledge and experience in the real estate market. The procedure is basically as follows:
A run-down property is bought and then refurbished. This creates the apartment or house upgraded and specifically increased in their value.
Thanks to a quick sale, a high profit can be generated quickly. There is always some risk involved, because the strategy is also a little bit too heavy speculation. In the USA, however, flipping has been part of everyday business for a long time. In Germany, the method has become popular with real estate investors. A certain amount of experience is necessary, as the fix and flip properties are mostly houses or apartments for which private buyers are no longer of interest. Mostly because the renovation would require a lot of time and technical know-how. Exactly that of course has the advantage that such real estate is right low prices can be bought. The technology is then revised and upgrading measures are carried out together with craftsmen. This quickly increases the value of the house or apartment and the end customer finds an appealing home again. Owner-occupiers as well as capital investors come into question as buyers.
A purchase is made according to these criteria
The question now arises as to what criteria should be used to buy an old apartment or house. The most important is the Purchase price per square meter of living space.
The margin is the difference between the purchase price and the sales price. If the price is consistent and appealing, then it is a matter of evaluating the look of the fix and flip property. It can be particularly promising to choose your rather shabby objects that have great potential for embellishment. In addition to the appearance and the price, the location is also decisive.
After all, the strategy is about building a property with as little as possible Expenditure of time for sale. A location somewhere in the middle of nowhere is unfavorable because it takes too long for an investor to find another buyer. However, if the location is central and cheap, you can quickly find someone interested.
The entire business thrives on transforming real estate quickly from an unusable apartment to one beautiful place of residence to transform and sell as quickly as possible. It is therefore crucial to choose a location that is very much in demand. This is usually the case wherever there is growth in all areas of life.
The best objects for fix and flip
So how do you find the best real estate for flipping? Some rely on certain ones Tools on the Internet such as social media, special apps or online marketing. To our liking, this is a little impersonal. We prefer to rely on direct contact with people. Using a network of brokers, addressing private individuals directly or sending postcards can help and lead to success.
It's worth walking through the streets with your eyes open. If an exciting object is noticed, the owner will be found and written to. These are private properties. Commercial real estate are not really suitable for freaking out. Why? Well, because the strategy thrives on a quick sale. In the case of commercial properties, everything usually takes a little longer, the customer base is more specific and smaller. Often these rooms have been empty for ages or have been specially designed.
This makes the search for a suitable buyer very difficult and time-consuming. All in all, fix and flip is not suitable for commercial properties.
The American and German markets in comparison
The strategy of fix and flip real estate has long been established on the American market. In Germany this is not quite the case. But why is it like that? Basically, the Germans are not quite like that willing to take risks like the people of America. People in Germany are also settled much longer than in the United States. Families there move significantly more often. Moving to a new home every three to four years is not uncommon. It is also much easier to find a reasonable one in the American market financing because there are no to very few regulations in America.
Banks have no problems with high-risk purchases according to the fix and flip strategy and finance such purchases faster than in Germany. Another reason is likely that the Additional purchase costs in the USA are significantly lower than in Germany. There is no real estate transfer tax in America. As the owner of a property, you only pay the current property tax. Even if this is actually higher than in the Federal Republic of Germany: The elimination of the Real estate transfer tax makes the purchase a significantly more cost-effective undertaking.
In this way, an apartment or a house can easily be bought and sold at a profit. In comparison: In Germany, the ancillary purchase costs, depending on the federal state, amount to up to 15 percent of the total purchase price. That’s a decent sum, that’s for onesale of course has to be brought in again. Another difference between the American and the German market lies in data protection. In America this does not exist, so to speak, the owners of the respective house can be researched on the Internet without any problems. In most cases, the contact details are stored directly and it is easy to get in touch to buy a property. In the USA, you can also find out whether there is a mortgage on the fix and flip property and who is paying it. In Germany, such information is either not available at all or only with great effort and expense. This is why fix and flip is much more popular and more common in America than it is here.
How does the fix and flip work with real estate?
We have already explained in detail what fix and flip properties are all about. But what about the financing for fix and flip real estate? There are basically different ways of doing this. It is recommended for financing that Equity to use.
That could mean something that someone buys an apartment for around 40,000 euros with their own money, then renovates and spices it up for 7,000 euros and then sells it for 90,000 euros in the end. Why does this make sense for a fix and flip property? Quite simply because your own money is the fastest, after all, there is no financial institution involved. This means that real estate can be bought quickly and resold at a profit. Another option for financing a fix and flip property is one Co-investment.
Many wealthy people from their private sphere are looking for good capital investments. However, they are not experienced enough in the market or do not have time to familiarize themselves with it. We offer these interested parties an attractive return on their capital. We use this capital to buy real estate fix and flip. The financing of fix and flip real estate is therefore a good option for us as brokers and for private investors as well.
Fix and flip impressions
Bedroom before renovation
Bedroom after renovation
Kitchen before renovation
Kitchen after renovation
Bathroom before renovation
Bathroom after renovation
The classic financing of real estate
In fact, there is another way that is more classic. Namely the one about that Financing through the bank. This is a difficult option, especially for newbies, as it is not easy to get funding for it. It is possible to negotiate a loan, which one flexible is available. This offers more flexibility, but is also associated with higher interest rates. Under certain circumstances, financing with a flexible interest rate would also be possible, even if these are also higher. In order to convince a bank with fix and flip real estate, you usually need proof that the model with fix and flip real estate has already been successfully implemented. Those who rely on bank financing usually need 10 to 35 percent equity.
The future of Fix and Flip in Germany
In fact, we see that fix and flip properties are becoming increasingly popular. However, it is recommended to specialize in the model. Simply use a model as a test fix and flip real estate trying can backfire. For the concept it takes Market knowledge and a certain Know-how. If you don't think of all things and forget things, you run the risk of falling flat on your face. In fact, the model with fix and flip real estate will probably also become more and more popular and appreciated in the Federal Republic of Germany in the coming years. Many real estate investors rely on fix and flip and generate large sums of money quickly. These can then be reinvested in new properties. In this way, fixed and flip properties can be bought over the long term and rented out over the long term.
Buying real estate without equity- is that possible?
Many people ask themselves whether it is also possible to practice fix and flip without equity. Yes, of course you can. This requires investors who can make quick decisions and pay quickly. The profile is discussed with them. Are you looking for multi-family houses? Or condominiums? Next, exactly these properties will be searched for. Of course, it is important to ensure that the property is bought more cheaply than it will later be offered to the interested party. Thanks to the strategy, it is possible to make a profit and that completely without equity.
fix and flip real estate: strategies
In principle, the most promising strategy for a fix and flip with real estate is to do so if possible properties in need of renovation and quickly resell them - or possibly rent them out. This is lucrative because many people lack the idea of a rather bleak looking one fix and flip Real estate will look renovated. In addition, many interested parties shy away from the time and expense of having to extensively renovate an apartment first. Many interested parties are not able to do the work themselves with manual skills and there is a lack of knowledge or desire. You can also buy a property below its value and sell it again. We offer you a free property valuation for this process.
You can only be successful in the market if you really have a clue about the subject and have already sold some properties. But those who then bring in a lot of personal contribution can not be uncommon with increases in value of up to 100 percent net. In fact, the strategy is also the opportunity to gain a lot of experience in the market or to expand it.
Fix and Flip vs Buy and Hold
The buy and hold strategy describes the approach to investments that are designed for the long term. The goal is not to get one quickly Price gain to generate, but rather to drive a strategy that relies on calm. This strategy is very popular in Germany because on the one hand it has been scientifically well researched and on the other it means less risk. This is also a welcome model for inexperienced dealers. The classic strategy looks like this: someone buys an object and then keeps it in their portfolio for a few years. The property then generates additional income.
. Basically, this is the opposite of the fix and flip strategy. Because fix and flip is about buying a property as quickly as possible, renovating it and reselling it at a profit in a short period of time. In this way, equity can be increased quickly. However, prior knowledge and skills are required for the strategy, otherwise you can quickly get bogged down.
Is the model suitable for beginners?
Beginners are advised to familiarize themselves well with the subject. Anyone who is not familiar with the market and who hastily buys a cheap apartment risks a bloody nose. The wrong location that inappropriate fix and flip properties or other mistakes can prevent the property from being sold or result in a loss.
Frequently asked questions (FAQ)
What does fix and flip mean?
Fix and Flip stands for the concept of buying a property as cheaply as possible, then upgrading it and then selling it at a higher price. The strategy originally came from America, but is also enjoying increasing popularity in Germany.
How much money do I need for fix and flip projects?
The amount depends very much on the purchase price and creditworthiness. Most of the time, a bank's outside capital is used, but equity capital often has to be used.
The right financing for fix and flip real estate?
The project duration at Fix and Flip is very short. It is therefore advisable to use variable financing.
According to which criteria should I buy?
The most decisive factor when buying using the Fix and Flip strategy is the price per square meter of living space. Of course, factors such as the condition of the home and location also play a role.
Buying real estate without equity - is that possible?
Yes, you can buy real estate using the Fix and Flip concept without equity capital. This requires investors who don't know much about the market but want to make a profit. We then usually discuss a portfolio with you.
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