House flipping can be extremely profitable if done right. Learn how to fix and flip houses and insider tips on finding, buying, renovating, and selling properties for big profits.
House flipping – the process of purchasing distressed properties to renovate and quickly resell at a profit – is an enticing real estate strategy that can generate big returns if executed correctly. Seasoned house flippers earn annual profits in the six figures on average, with top performers netting even higher rewards.
But as the saying goes, great rewards don’t come without great risks. Many novice investors jump into flipping, only to realize major losses when key aspects like finding deals, estimating repairs, or selling go awry.
So how can you set your future flips up for success and large profits? This comprehensive guide provides insider tips and best practices on each step:
- Sourcing – Finding undervalued properties with profit potential before others spot them is key. Learn creative deal-hunting strategies beyond just MLS listings.
- Funding – Flipping works best when you can move quickly and with cash in hand. Explore financing options to fuel flips, even with limited capital.
- Rehabbing – Transforming customs to turn major profits doesn’t happen by chance. Use expert design planning and budgeting techniques.
- Selling – Marketing correctly to motivated buyers while negotiating ideal terms separates average flips from blockbuster home runs.
Follow these field-tested best practices properly, and you too can build a highly profitable house-flipping business that lets you earn significant income while making your own hours. This guide shares the precise methods and insider knowledge that full-time fix-and-flip professionals use to score million-dollar paydays.
Let’s get started unlocking your house-flipping profits!
Table of Contents
Understanding House Flipping
House flipping involves buying properties that need some work, renovating them, and then reselling for a profit. It can be a lucrative business if done properly.
What is House Flipping?
House flipping is the process of purchasing a run-down home at a low price, renovating it to improve its condition and value, and then reselling it quickly for a nice profit. The key is to add enough value through fixes and renovations so you can sell it for substantially more than what you paid.
How Much Profit Can You Make From Flipping Houses?
Experienced house flippers generally aim to make a 20-30% profit on their investment in a flip property.
So if you buy a property for $100,000, spend $30,000 on renovations and fixes, and then sell it for $160,000 – you’ve made $30,000 profit on a $130,000 investment. That works out to a solid 23% return.
Top performing flips can sometimes generate even bigger returns – 50-100% in some hot markets. But those take experience to find and execute correctly.
What Skills Do You Need for Flipping Houses?
Successful house flipping requires certain key skills:
- Finding undervalued properties with potential
- Accurately estimating renovation costs
- Securing financing to fund flips
- Managing contractors and renovations
- Marketing and selling properties profitably
If you lack experience in any of those areas, consider getting trained or finding a partner who can complement your skills.
Finding the Right Property to Flip
Choosing the right fixer-upper property to flip is arguably the most critical step. You want to ensure the numbers will work out in the end.
Where to Look for Fix and Flip Houses
Great deals on properties with potential come up in certain places, including:
- Foreclosure auctions
- Bank-owned homes (REOs)
- Estate and probate sales
- Older homes in run-down neighborhoods with high rental demand
- Distressed owners facing divorce or relocation
Connecting with experienced real estate agents can help you identify promising flip candidates as soon as they hit the market.
What to Look for in a Profitable Flip Houses
Ideally a profitable flip will check as many boxes as possible:
- Below-market deal price
- Located in a hot resale location
- Solid structural bones (roof, foundation etc)
- Mostly cosmetic fixes needed
- Cost-effective renovations
- High buyer demand for style/size
Avoid major foundation issues, properties in dangerous areas, extreme remodeling, and flips in slow markets.
Calculating Flip Costs and Profit Margin
Thoroughly estimate all your costs before buying:
- Purchase price
- Closing fees/escrow
- Loan costs
- Permitting
- Renovation budget
- Holding fees
- Realtor commissions
- Misc selling costs
Compare total into cost vs. after repair value to project your profit margin. Budget for buffers and operate conservatively.
Buying a Property for Flipping
Putting together the best possible offer improves your chances of acquiring a profitable flip property.
Getting Financing for a Flip
As a new flipper, self-financing with cash or getting a partner with capital are good options. Once established, financing flips with a portfolio lender through a rehab loan allows more volume. Government backed 203k loans help cover purchase + approved repairs for owner-occupants. Hard money loans are quick and relatively easy to qualify for, but have high rates.
Making a Competitive Purchase Offer
Submit your offer as soon as a promising flip candidate hits the market. Go in strong on the purchase price and terms. Consider asking for closing credits or a home warranty to ease negotiations. Manage expectations if making an offer sight unseen.
Negotiating a Good Price
Leave wiggle room to come up from your initial offer, while voicing your enthusiasm and flexibility to work with the seller. Ask for credits to offset small repairs or if unable to view the property. Get an inspection done as soon as possible after going under contract to uncover any major issues.
Fixing Up the Flip Property
Renovating the property you acquired is generally where most risk and effort comes in when flipping houses. Careful planning and budgeting is key.
Creating a Renovation Budget
Walk through with your contractor to scope all needed repairs. Build out detailed costs for:
| Item | Est Cost |
|---|---|
| Materials | $ |
| Labor | $ |
| Subcontracts | $ |
| Contingency | 10-20% |
| Total Budget | $ |
Pad estimates for surprises that pop up mid-project.
Hiring the Right Contractors
Find licensed contractors suited for your project type. Check reviews and references thoroughly. Ensure proper insurance. Favor fixed price bids over hourly time and materials. inspection to uncover any major issues.
Managing Renovation Timelines
Create a project timeline outlining start/end dates for each task. Build in buffers expecting delays. Visit the property frequently for progress checks. Take lots of photos pre and post renovation for selling.
Selling Your Flip Property
To realize your profits, the improved property must be sold for top dollar quickly. Effective marketing and pricing is key.
Pricing to Sell Quickly
Aim for no more than 90-120 days on the market to keep holding costs reasonable and avoid over improving. Research recently sold “comps” for pricing guidance. List somewhat below market value to drive interest and bids over asking.
Marketing a Flip Effectively
Professional photography and compelling copy will entice buyers browsing online listings. Staging furniture also helps buyers visualize enjoying the home. Market broadly across MLS, Zillow, social media. Consider a broker open house event.
Negotiating a Profitable Sale
Expect to receive multiple offers if priced right. Get pre-approved buyers to show they are serious. Review all terms carefully. Weigh highest price vs best terms that reduce selling costs or liability. Don’t be afraid to counter offer.
Minimizing Risks and Maximizing Profits
Flipping houses carries financial risks that can be minimized with careful planning.
Conducting Due Diligence
Inspect properties thoroughly yourself and hire professionals to uncover all issues upfront before finalizing a purchase. Probe market demand. Consult experienced local agents.
Securing Financing
Conservative estimates on costs and profit. Have project contingencies and access to extra financing if repairs escalate. Title insurance also protects against unknown liens.
Flipping Safely and Ethically
Vet all partners. Abide by regulations. Disclose as required. Complete renovations properly with licensed help. Consider community benefits with sustainable materials. Avoid cut corners solely for extra profits down the road.
