What is a fix-and-flip, and how does a private investor participate in one?
A fix-and-flip is the purchase of a property below market value, usually off-market and in poor condition, followed by renovation and resale. Its profit is roughly the after-repair value minus purchase price, rehab, holding, financing and selling costs. A private investor can participate as a lender to the project, as an equity partner in a specific property, or through a fund that does many flips, and each carries a different position in line and a different risk.
The anatomy of a deal
Every renovation project is the same arithmetic:
| Line | What it is |
|---|---|
| Purchase price | Fixed at closing. The only number you truly control. |
| Rehab budget | Scope of work, bids, plus a contingency for what the walls hide. |
| Holding costs | Interest, taxes, insurance, utilities for every month you own it. |
| Closing and selling costs | Title, escrow, excise tax, commissions on the way out. |
| After-repair value (ARV) | What the finished house should sell for, supported by comparable sales. |
| Margin | ARV minus everything above. The cushion, and if all goes well, the profit. |
Two ratios summarize the risk: loan-to-value (how much debt against the finished value) and loan-to-cost (how much debt against total project cost). Lower is safer.
A real example, in Dan’s words
In March 2026 a referral partner called about a house inside Spokane city limits that had been a drug house and then caught fire, losing a third of its roof. Tax-assessed value: about $170,000. ARV: about $305,000. Dan’s number: $12,000, less than the average used car. He bought it, and his team’s realtor found an investor-buyer for it; it closed in 16 days. Dan does not disclose the sale price, and this site does not publish returns on any project. The next owner is doing the full renovation. Listen to the episode for the whole story.
That deal illustrates the point: whatever cushion existed came from the purchase price, and the purchase price came from a relationship. It is one project, not a pattern to count on.
Three ways to participate
- Lend to the project. Fund the purchase and rehab under a note secured by the house. Paid ahead of equity, a stated rate, collateral as recourse if the borrower defaults.
- Partner on the project. Own a share of the entity that owns the house. Paid after lenders; share in the upside and the downside.
- Invest in a fund that does many projects a year. Diversified across houses and timelines; you rely on the manager’s process rather than any one deal.
What to look at before saying yes
The scope of work and who built it. The comps behind the ARV. The timeline and what a six-month delay does to the numbers. Who the contractor is and whether they are an affiliate. And the operator’s history: how many of these have they finished, and what happened on the one that went wrong.