👉 Jump To: What Is House Flipping? | Pros and Cons | How to Flip a House? | Steps to Flip your House | How Long Does it Take? | How Much Does it Cost? | Houzeo Helps Flippers Save Money | Final Thoughts | FAQs
1 in 10 houses sold in the US is a flipped property. Despite the decrease in profits nationwide people continue to flip houses. Let’s have a look at this comprehensive guide that will help you to learn how to flip a house successfully.
What is House Flipping?
Flipping or house flipping is a business strategy where an investor buys a property, fixes it up, and resells it at a profit. The idea behind flipping a house is a short-term investment with high gains. The buyer does not use the property, but simply renovates and sells it quickly.
Investors look for distressed properties to fix and flip. These are the properties the owners want to sell without any changes, are up for auction, or are pending foreclosure. Such factors make properties an asset for home flippers.
Pros and Cons of Flipping a House
| Factors | ✅ Pros | ❌ Cons |
|---|---|---|
| 💰 Profits | Great profits with each fix & flip project. | Lawsuits of houses with title issues can incur losses. |
| 👨💼Autonomy | Full control as the owner. You decide the time, effort, and budget of the whole process. | Flipping can be financially draining and risky when carried out alone. |
| 🏠 Home Values | You may improve the home values in the neighborhood with proper renovation. | Unforeseen defects in the property can affect the home value. |
| 🌐Market Exposure | Good exposure in the real estate market. | Requires in-depth understanding of the real estate market which can be exhausting. |
How to Flip a House?
Your property can be 1 of the 10 houses successfully flipped in 2022. Have a look at the detailed house flipping checklist that will help you do it right.
Flipping 101: Steps for the Smart House Flipper
Flipping a house checklist that covers each step of the fix and flips process:
1. Research and Analyze the Market
Research and analysis are essential to choosing a favorable property. People can identify the right housing market for home flippers through a good search. It will help the investors to fix an appropriate purchase price and determine if a loan is required. An overall evaluation of the property is vital to the process of flipping a house.
2. Prepare a Plan and Budget
Flipping requires rigorous financial planning to cover risks. With the ROI (Return of Investment) dropping to a 13-year low, home flippers need to be careful while making a budget plan. The plan can also include other aspects that may need your time, efforts, and additional expenses.
You must have a foolproof plan of action with great emphasis on the budget. The crux of the matter is to identify the source of investment in house flipping. It is ideal to purchase low-value property that will have fewer rehab costs. You don’t have to get into costly repairs until they are necessary. Remember, the idea is to have a smooth house flipping experience.
3. Choose Your Financing Source
Having the capital to purchase a property is a crucial aspect of house flipping. Therefore, it is important to finalize a source of funding at the beginning to ensure a smooth acquisition. In case there is a shortage of funds, then a lender can cover for you.
Beginners should invest in less-risky and lesser-value properties to be on the safe side. For example – A home with a value of $200,000 and a 20% down payment will only cost you $40,000 in cash. But, a home with a value of $500,000 will cost you $100,000, that’s quite a difference!
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🌟Good Credit Score Can Help Home Flippers🌟
If you wish to ask for a loan from the bank, you must have a decent credit score. A good credit score can increase your chances to get a loan to purchase a property.
4. Apply Your Skills or Take the Help of a Professional
As an investor, one must understand their limitations. It is essential to decide whether or not to ask for help from a real estate agent. Have a look at this table to understand whether you want to flip a home by yourself or involve a real estate agent.
| Steps in Flipping | House Flipper | Real Estate Agent |
|---|---|---|
| Market Insights | ❌ | ✅ |
| Pricing Expertise | ❌ | ✅ |
| Access to MLS | ❌ | ✅ |
| House Sales Experience | ❌ | ✅ |
» Top Real Estate Agents: Read to know about the best in America!
5. Network with Realtors and Contractors
Networking with people like contractors, electricians, plumbers, painters, etc. can expedite the fix-up process. While learning how to flip a home, it is necessary to work with people who would help gain knowledge and exposure. Their expertise can become your guide to flipping houses. It is recommended to build good relationships with contractors and other vendors who would help in renovating and upgrading the house.
6. Sweat Equity
Sweat equity is an interest earned for the non-monetary contribution to the process. In contrast to financial aid, sweat equity is earned from the labor and efforts put into the project. In the case of flipping, as part of sweat equity, an investor puts in efforts themselves to upgrade the house. The profit is earned when the upgraded property is sold at a profitable price.
7. Find a House to Flip
41% of buyers look for houses themselves without a real estate agent. This gives them the autonomy to thoroughly research and analyze the market according to their needs. An important part of the process is to find a property that is affordable to fix and flip. However, they must still bear the cost of repairs, renovations, closing costs, Realtor fees, etc.
It is a time-consuming process but is fruitful too. It is important to have patience while trying to find a good deal. Based on the money spent in the acquisition, home flippers have transparency of future expenses. You may want to reach out to the potential sellers for their property via Realtors, mailers, auctions, etc.
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👉 Ugly Houses Are Great Assets for Flippers!
It’s best to purchase an “ugly” house in a good neighborhood so that it be sold at a higher price. Getting the flipped house listed on the MLS will help you find a buyer and save thousands of dollars.
» Flat Fee MLS: Houzeo can list your flipped property for $349 only!
8. Buy the House
Wondering how to find homes to flip? — more than 90% of home buyers found their properties online! After securing the finances and understanding the market, a buyer can acquire the property quickly.
The property you acquire determines the money you’ll earn at the end of the flip. That’s why successful house flippers are always careful when choosing a house to invest in.
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👉 The Home Flipper’s 70% Rule When Buying a Flip
The 70% rule for home flipping states that you should not pay more than 70% of the after-repair value (ARV) of the flip to purchase and rehab the property.
Formula: Purchase Price + Rehab Cost = 70% of After Repair Value
Vital factors to check when buying a property:
| Location | If the property is in a great location, then it becomes valuable. Check if any malls, schools, or hospitals are in the area, but reconsider if it exceeds your budget. |
| Property Condition | Be cautious of houses with multiple defects. Such a property can cost you a lot of money and time before marketing it. It’s wise to stick to properties that only need minor repairs and upgrades. Perform a home inspection to estimate the home rehab cost, and uncover hidden defects. |
| Market Value | Homes priced below the market value can give you the highest return. Consider purchasing distressed properties (under foreclosure, short sale, a problem with mortgage payments, or tax bill). Conduct a Comparative Market Analysis or CMA to check if a property is below market value. |
9. Invest in Necessary Repairs and Renovation
Invest in repairs that increase the value of the house. Many sellers closed sales faster and recovered 52% of the upgrade costs for just refurbishing the kitchen. However, you should hire a professional to fix property issues beyond your capability. Hiring a contractor can have a great impact on your flipping project both structurally and monetarily.
Renovation of the house is only a part of the flipping process. So, ensure that it does not exceed the budget and time to flip the house. If you take more time to renovate, then you’ll lose money on interest, utilities, insurance, maintenance, and more.
10. Sell the Flipped House
Finding the right buyer will determine the profit you can earn from the flip. Therefore, you need a pricing strategy that maximizes your profit. To earn a profit, the flipped house needs to be sold. This requires a thorough marketing strategy so that the flipper gets maximum exposure to sell the property. A flipper can do this alone or approach a Realtor.
Selling a house can be time-consuming and difficult if the seller does not have the right resources. Usually, a Realtor is a right person to help you find buyers since they have more resources to find good buyers. With Houzeo, flippers can get access to the MLS at a Flat Fee making their listing process smooth.
Why Should I List With a Flat Fee MLS?🤔
- Get access to the MLS for maximum exposure.
- Pay a Flat Fee that stays within your budget.
- Advanced online tools that give you everything at one space.
How Long Does it Take to Flip a House?
The average time to flip a house is 6 months or 180 days. This may vary from state to state and could range between 4-6 months in an ideal situation. However, some flipped houses stay in the market for more than 202 days as well! Buying low-value homes in a slow market will only spoil your prospects of selling them at a profit.
Choosing the location of the property influences how long it takes to flip a house. Currently, cities like Jacksonville, Phoenix, Seattle, Tampa, and Charlotte are the hottest markets for flipping real estate.
How Much Does it Cost to Flip a House?
A seller pays 10% of the purchase price for the overall fix and flip process. The renovation and the buying cost are not the only costs involved in the flipping business. So, while purchasing a property and getting into flipping, you should know all the costs related to the business. This will help you plan the house flipping.
Here are some costs that you should take care of as part of the house flip:
- Closing costs
- Property taxes
- Down payment when you buy a property
- Insurance fee
- Utility cost
- Cost for marketing
- Realtor fees
Is Flipping Houses Profitable?
Flipping is profitable if the entire process is thoroughly planned and executed. Most investors/beginners get into house flips because of the money that is involved. For example, if a house is valued at $500,000 and the repair value comes out to be $30,000, then the investor should sell a house at a value greater than $530,000 to make a profit.
House flippers have to sell at a profit as they need to pay a 5%-6% agent commission to sell the house. To guarantee maximum profits, home flippers should consider listing the property with a Flat Fee MLS to avoid high commissions.
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Houzeo Can Help in Flipping Homes – Here’s How
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Houzeo is available nationwide.
Check out Houzeo reviews to understand why it is the best in the business. The following video will give you insights into the platform:
Final Thoughts
Real estate flipping is a popular business strategy in the US. While it helps the owners to let go of their distressed properties, making profits is a crucial factor in the process. You can ask for help from a Realtor to get through the whole flipping process or use a platform like Houzeo to save on Realtor commissions.
» Realtor estate commissions are declining: Click here to know more about the declining real estate commission in the country.
Frequently Asked Questions
How to flip houses with no money?
An individual need not invest their own money in the flipping business. A potential house flipper can get money through other sources such as hard money lenders, private investors, wholesalers, flipping investors, home equity, and crowdfunding.
What type of loan is best for flipping a house?
Since house flipping is a short-term project, it is recommended not to apply for long-term loans. Some forms of short-term loans include private lenders, cash-out refinances, and home equity lines of credit.
What is the 70% rule in house flipping?
The 70% rule is for home flippers to determine the maximum price they should pay for a property. The purpose of the rule is that they should spend no more than 70% of the home's after-repair value minus the costs of repairing the property.
Is house flipping a good career?
A person can explore the house flipping process by doing thorough research about it. If done systematically, flipping houses can be a good career, but it can be emotionally draining as well. So, it is recommended that an individual decides after understanding the industry properly.
How to become a successful house flipper?
Flipping houses is profitable and can give good returns if handled correctly. Most flippers familiar with real estate can bring their expertise to the table and procure good returns. The risky part of the business is that if you don't prepare well, you might end up losing money. Successful home flippers will be thorough and well-informed about the market and will avoid risky actions.
How much does it cost a year to flip a house?
The average cost to flip a house depends on the location of the property, the housing market in the area, property type, cost of renovations, etc. The total includes the sum of the acquisition price, repair costs, marketing costs, and sales costs. The final costs will be around 10% of the purchase price usually.
What is Micro Flipping in real estate?
Micro flipping refers to the flipping strategy where an undervalued property is identified, purchased, and then sold quickly to a buyer. Micro flipping can be closed within a week if everything goes right. The major disadvantage of this business model is that you will have to stand against aggressive competitors. Big players like Zillow and Redfin have already made a mark in this space and thus it is very tough for individuals. Also, the profit margin is not much since you are closing the process quickly without any repairs or renovations.
How Flat Fee MLS platforms could be of great help in flipping homes?
Flat Fee MLS platforms like Houzeo make the job of flippers much easier when they want to sell the property to be flipped. These platforms demand a nominal commission/flat fee. Houzeo, to give the required property MLS exposure which is crucial to finding potential buyers.
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How to Flip A House How-to
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