Fix & Flip properties, also known as "fixer-uppers", are residential homes that often require major repairs and a significant infusion of investment capital to prepare them for sale. As a result, these properties are usually priced far below market value. Investors "Fix" the properties and then "Flip" or sell them at a price that covers their investment and includes a profit.
This can be a highly lucrative market which is why it is already a very competitive one. There are national companies, "We Buy Ugly Houses", etc. whose primary business is to locate, purchase, fix-up and sell these types of properties. They are professionals and highly knowledgeable about the market, property value and cost of repairing these properties.
There are also a number of small local investors or investor groups that focus on this market. Many of them are Realtors, who are close to the market and sometimes learn about available homes before they are listed in MLS. Although these investors compete to find and purchase the best "fixer-uppers", they often do not "flip" them. Instead of marketing them for sale, these homes are frequently turned into rental property.
Foreclosures, auctions, Sheriff's sales and other homes with debt problems are often fixer-uppers as well. Participating in these types of transactions requires special knowledge and ready access to large amounts of cash. We highly recommend seeking professional assistance before embarking on these types of sales.
The "Fix & Flip" or "Fix & Rent" market is crowded and very competitive. You may have heard the joke or comment that "everyone in Los Angeles is an aspiring actor ". At the height of the 2005 market, when prices increased an average of 25%, it seemed as if "everyone in Tucson was an investor".
Today's market has over twice as many homes available for purchase as in 2005, so there are deals to be found.You must carefully evaluate each opportunity, however, as to actual costs to repair, income producing value (rents) and actual market value once refurbished prior to making an investment decision.