Reduce the Risks of Fix and Flip with Bautex Quick, High-Quality Construction

Short-term real estate investors purchase run-down buildings and homes to either fix and flip or demolish and rebuild. The goal of both is a quick profit.

Unfor­tu­nate­ly, with fix and flip, unan­tic­i­pat­ed repairs, costs, and delays often cut into the profits. Also, many fix and flip buildings and homes are old and are not energy-efficient and durable, which poten­tial­ly makes them a poor invest­ment for the future buyers.

Short-term real estate investors can avoid the financial risks of fix and flip by demol­ish­ing and rebuild­ing with the Bautex Wall System. New con­struc­tion limits, if not elim­i­nates, the unplanned costs asso­ci­at­ed with fix and flips. Also, Bautex is quick to install, energy-efficient, low main­te­nance, and termite- and moisture-resistant. Short-term real estate investors and the future buyers can both win by demol­ish­ing run-down struc­tures and rebuild­ing with the Bautex Wall System.

What is a Fix and Flip Real Estate Investment?

A fix and flip is a short-term real estate invest­ment. According to the ATTOM Data Solutions U.S. Home Flipping Report, in 2017, 207,088 United States (U.S.) single-family homes and condos were flipped by a total of 138,410 real estate investors.

Typically, fix and flip involves a dis­tressed property sold below-market price. The goal of fix and flip is to renovate the property and then resell for a profit in a very short time (less than 12 months). In 2017, flipping a house took an average of 182 days. The challenge to real estate investors is to make sure the selling price will cover the total costs of ren­o­va­tion as well as a profit.

Fix and Flip Homes: Real Estate Investors Beware

Real estate investors should carefully consider the cost of ren­o­va­tion and the real estate market to determine if a fix and flip are worth their time and effort. First, it can take a real estate investor a sig­nif­i­cant amount of time to find a dis­tressed property in a good location.

Then, the investor must budget and estimate repair costs to determine if a desirable profit is possible in that real estate market. To fix and flip suc­cess­ful­ly, the real estate investor must be knowl­edge­able in the budgeting of ren­o­va­tion con­struc­tion as well as the local real estate market.

Fix and flip prop­er­ties are not for the cautious investor. The gamble with fix and flip is the like­li­hood of unex­pect­ed repairs and costs during the ren­o­va­tion, which can quickly put an investor over budget. Also, if the property does not sell quickly, the investor will accrue addi­tion­al property expense that cut into the profits.

Ulti­mate­ly the expected net profit of flipping a house can quickly disappear due to unfore­seen problems and delays. Many real estate investors consider fix and flip too risky an invest­ment strategy.

The Bottom Line and Low Profits of Many Fix and Flip Investments

According to the ATTOM Data Solutions United States (U.S.) Home Flipping Report, in 2017, the average return on invest­ment (percent of purchase price) for a fix and flip was 49.8 percent. Unfor­tu­nate­ly, recent data from Real­ty­Trac also found that 21 percent of fix and flips had gross profits of less than 10 percent and 8 percent sold for less than the purchase price.

Fix and Flip Homes: Buyers Beware

Fix and flip homes can look great on the outside; however, buyers should be aware of some hidden issues.

  • Real estate investors are not nec­es­sar­i­ly con­trac­tors; however, to maximize the profits of a fix and flip, some investors will save money on labor by doing the work them­selves. A choice that often costs the investors time and money but also produces sub­stan­dard work compared to that done by a skilled and qualified contractor.
  • Many fix and flip houses are old homes. Old renovated homes have more problems than newer homes. Old homes are also less energy-efficient, more prone to termites and moisture damage, less healthy, and may have higher main­te­nance than new homes.

Rebuild with the Bautex Wall System for a Superior Real Estate Investment

For short-term real estate investors inter­est­ed in avoiding the risks and problems asso­ci­at­ed with fix and flips, an excellent option is to demolish and rebuild with the Bautex Wall System.

New con­struc­tion with Bautex elim­i­nates the risk of unfore­seen issues and costs asso­ci­at­ed with major ren­o­va­tions. Also, Bautex con­struc­tion is quick because it combines structure, envelope, and insu­la­tion in a single, easy-to-install system.

Impor­tant­ly, Bautex Blocks have features that many fix and flips lack: Bautex Blocks are energy-efficient, healthy, low main­te­nance, and termite- and moisture-resistant. For a quick build and a pre­dictable profit in a very short time, real estate investors should consider building new with the Bautex Wall System.

ATTOM Data Solutions is the curator of ATTOM, a multi-sourced national property data warehouse that contains tax, deed, mortgage, fore­clo­sure, envi­ron­men­tal risk, natural hazard, health hazard, neigh­bor­hood char­ac­ter­is­tic and property char­ac­ter­is­tic data for over 155 million U.S. properties.

2Net profit of flipping a house is the return on invest­ment (ROI) minus the sum of the acqui­si­tion cost, rehab costs, carrying costs, and marketing and sales costs