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