HGTV "Fixer Upper" Financing Model

[Ben Morrison]

Hey BP,

First, let's clear the air here. I fully understand "Fixer Upper" and other similar shows are for entertainment purposes and do not fully show the details of a REI business.

Now that that's out of the way, how would you think similar companies are structuring these deals? They have a home buyer that can spend up to $250k (or some number), but are purchasing homes for say $150k and putting $100k of repairs into them. How would this type of deal work in the real world?

My inexperienced thoughts on the subject - Buyer is obtaining a preapproval letter from a bank. "Fixer Upper Inc" is then finding a property with an ARV that meets or exceeds that value. They purchase through their own means (cash, private investor, HML) and perform the rehab. After rehab is done, they then have the home appraised and hope it appraises for at or above the ARV estimate and buyer can then purchase the home for the aforementioned total budget ($250k in this case) through traditional financing (mortgage).

Is this what you'd expect is happening on these deals?