This question has a lot of different factors.
For instance, every investor has different values that they are trying to reach in terms of the return of investment.
When a fix and flipper is doing many projects per year, they may be able to accept lower profit returns because they are hitting their mark so many times per year.
While there are some who are doing one or two projects per year, they may be looking for a much higher return of investment because they have to make their entire income on those two projects.
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Hi, this is Steven with Effortless Home Buyers. One of the most common questions we get from our clients is what is the profit that a fix and flipper typically makes? So this question has a lot of different moving parts to it. For instance, every investor has different values that they're trying to hit in terms of the return on investment they're trying to make. Some fix and flippers because they're doing so many projects per year, they're able to accept lower profit returns because they're hitting that mark so many times per year. With some of that's only doing one or two projects per year, they may be looking for a much higher return on investment because they have to make their entire income or their entire return on investment on just those two properties per year. So with the fix and flipper, they're going to be looking at what is the After Repaired Value and then walking back the cost they're going to take for it to get to that After Repaired Value .
And then in between what they're able to actually get the property under contract for what they need to buy the property at, those expenses and the ARV that's where their private lives, that little spread in between. So a fix and flip is typically going to be looking for anywhere from 15% to 30% return on investment. Of course they would love for it to be much higher than that. But one of the most common things that fix and flippers have to keep in mind is that things go wrong when doing rehabs of properties. You start opening up walls and you find out that there's a little bit more work than you had originally planned for. So fix and flippers do have to factor that in with their expenses and they typically have kind of a contingency cost associated with what they're budgeting out for a project. So while they shoot for maybe a 30% return on investment, they often have to settle within their mind that they may be actually making less than that around maybe a 20% return on investment and with how long it takes for a property to be rehabbed and then marketed, and then eventually sold by selling it to a owner occupant that return on investment can often be pretty low depending on how long it takes to capture that return on investment.
So the short answer is that fix and flippers are typically looking for double digit returns. Upwards of 15%, I would say an average of around 25% would be pretty standard for most markets, but depending on how long it takes for a property to be rehabbed and sold on the market, they may be looking for higher so that when it's split up over a series of time, that they're actually looking at something that's a solid investment.
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