REIPRIME Logo
Intermediate terms

Essential House Flipping Basics Terms

This curated collection includes key terms that might be helpful when exploring house flipping basics. It covers essential concepts from property valuation and financing to renovation planning and profitability analysis. These terms were selected based on common questions and areas where investors often need clarity.

Learning Path

1

The 70% Rule

The 70% Rule is a real estate investment guideline stating that a fix-and-flip investor should pay no more than 70% of a property's After Repair Value (ARV) minus the estimated repair costs, ensuring a sufficient profit margin.

Intermediate12-13 min
2

Scope of Work (SOW)

A Scope of Work (SOW) is a detailed document in real estate investing that outlines all tasks, materials, timelines, and quality standards for a property renovation or development project, serving as a blueprint for all stakeholders.

Intermediate14-15 min
3

Hard Money Loan

A hard money loan is a short-term, asset-backed real estate loan from private lenders, primarily based on the property's value rather than the borrower's credit, used for quick acquisitions or rehab projects.

Intermediate13-14 min
4

Real Estate Exit Strategy

A real estate exit strategy is a predefined plan for how an investor will liquidate or conclude their involvement with a property, aiming to realize profits, recover capital, or mitigate losses.

Intermediate13-14 min
5

Holding Costs

Holding costs are the recurring expenses associated with owning a real estate property, such as property taxes, insurance, utilities, and mortgage interest, incurred from acquisition until sale or consistent income generation.

Intermediate14-15 min
6

Contingency Fund

A contingency fund in real estate is a dedicated reserve of money set aside to cover unforeseen property-related expenses, major repairs, or periods of income loss, safeguarding an investment from unexpected financial shocks.

Intermediate12-13 min
7

Profit Margin

Profit margin is a financial metric that measures the percentage of revenue that remains as profit after all costs and expenses have been deducted, indicating an investment's profitability and operational efficiency.

Intermediate15-18 min
8

Off-Market Property

An off-market property is real estate available for sale but not publicly listed on a Multiple Listing Service (MLS), often sold through private channels or direct outreach.

Intermediate12-13 min
9

Comparative Market Analysis

A Comparative Market Analysis (CMA) is an informal estimate of a property's value based on recently sold, active, and expired listings in the same area, used by real estate professionals to help buyers and sellers determine a competitive price.

Intermediate15-18 min
10

After Repair Value

After Repair Value (ARV) is the estimated market value of a property after all planned renovations and improvements have been completed, crucial for assessing investment profitability.

Intermediate15-18 min
11

Rehab Budget

A rehab budget is a comprehensive financial plan detailing all anticipated costs for renovating a real estate property, essential for projecting profitability and managing project expenses.

Intermediate15-18 min
12

Private Money Loan

A private money loan is a non-bank loan provided by individuals or private companies, secured by real estate, offering flexible terms and fast funding for real estate investors.

Intermediate12-13 min
13

Distressed Property

A distressed property is real estate facing financial, physical, or legal challenges, often sold below market value due to owner pressure or lender action, offering potential for investor profit.

Beginner15-18 min
14

Due Diligence

Due diligence is the critical process of investigating and verifying all material facts about a property and its financials before a real estate acquisition, aiming to identify risks and ensure an informed investment decision.

Intermediate14-15 min
15

Loan-to-Cost (LTC)

Loan-to-Cost (LTC) is a financial ratio used in real estate development and construction financing, comparing the loan amount to the total cost of a project, including acquisition, construction, and soft costs. It helps lenders assess risk and determine the maximum loan amount.

Intermediate12-13 min