Flipping houses can be a profitable and exciting real estate investment plan, but it requires careful planning and hard work.
It can be challenging but extremely rewarding if done correctly. However, having a solid plan and understanding each step in the process is essential.
Don’t be intimidated; starting your house-flipping business is possible with dedication and following the steps of our beginner’s guide.
So let’s get into how to start flipping houses and get you prepared to make profits!
- House flipping is a real estate business that involves planning and careful budgeting.
- House flipping is a marathon, not a sprint, requiring significant time from property acquisition to sale.
- House flipping isn’t a fast track to wealth; it requires a thorough understanding of risks and readiness for possible financial setbacks.
- Beginners often miscalculate the resources and time needed for a house-flipping project and may overvalue their own abilities.
- Think about investing in properties in a different- using Fundrise to earn passive income over time, with no labor or repairs needed!
What Is House Flipping?
So, you’ve probably heard the term “house flipping” thrown around in conversations about real estate and investing. But what exactly does it mean? Well, let me break it down for you.
House flipping is when someone buys a house to fix it up and sell it for a profit. The idea is to give the house a makeover. You invest your time, money, and effort into renovating and improving it.
This could involve anything from painting the walls and replacing the flooring to more extensive repairs or even making structural changes.
Once the renovations are complete, it’s time to put that shiny, revamped house back on the market and sell for a higher price, ultimately leaving you a profit.
9 Steps For How To Start Flipping Houses
So, you’re thinking about diving into the house-flipping market? Exciting stuff!
But before you start swinging hammers and counting your profits, there are a few things you need to know.
1. Research Houses (In Budget!)
First things first: research, research, research! You need to get a handle on the local real estate market and find houses that fit your budget.
There are a few ways house flippers can find an investment property:
One option is to tap into the Multiple Listing Service (MLS), which is like a treasure trove of properties for sale that real estate agents use.
You can watch for auctions and estate sales or even try your luck with private sellers. The key is to cast a wide net and explore all your options.
When you’re on the hunt for potential real estate investment properties, keep a few key factors in mind. Location and property condition will affect how much money you get from this!
Once you’ve narrowed your options, it’s time to crunch some numbers. Consider the property’s after-repair value (ARV)—the estimated value it will have after all the renovations.
You must also factor in property taxes, homeowners insurance, and other ongoing property costs. Make sure the potential return on investment outweighs all the expenses so you’ll have profits!
2. Get Funding
Now let’s talk about how a house flipper can secure the money for their house-flipping project and buy properties.
First, you have the traditional route: mortgages from banks or other financial institutions. These can be great if you qualify with a good credit score, but you must budget for a down payment.
Another option for the house flipper is to turn to hard money lenders. Hard money lenders specialize in short-term loans for real estate investors like you.
The interest rates of a hard money loan may be higher than a traditional loan, but hard money lenders can approve your application faster than you can say “house flipping.”
And in this fast-paced real estate market, speed is key, so you may need to go with a hard money lender to snag the perfect property in this fast-paced market.
Now, here’s a little secret: private lenders are another option. A private lender often offers more flexible loan terms than banks or hard money lenders but can have even higher interest rates or fees.
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3. Create A Budget (House & Work!)
Creating a budget is one of the most crucial steps for house flippers in the house-flipping process. Trust me – you don’t want to skip this part!
First things first, let’s break down what your budget should include. Start by considering the price of the property. How much are you willing to shell out for your flip?
Next up, estimate the repair costs of the house flip (with some wiggle room). Look closely at the property and determine what needs fixing, whether minor or major renovations.
Now, let’s talk about renovations. Your budget should cover the cost of the necessary upgrades that will truly add value to the property.
You don’t want to go overboard and spend a fortune on unnecessary bells and whistles. Focus on the improvements that will boost the property’s market value and make potential buyers swoon.
4. Connect With A Good Realtor
With expert insights from a real estate agent, you can better navigate the real estate investing maze, finding the best opportunities and hidden gems in the market.
Think of real estate agents as your treasure map to find potential investment properties to make your flipping dreams come true. They’re like your secret weapon!
They’ll also try to get you better deals by leveraging the repairs needed to lower that purchase price. It’s like having a master negotiator, ensuring you maximize your flipping profits!
Let’s fast forward to the grand finale: selling your beautifully renovated property. You’ll want a great real estate agent in your corner who knows how to price it just right and market it like a pro.
5. Make Offers On Properties
When you’ve found a property that fits your vision and budget, it’s time to make your move. Your trusty real estate agent will be your wing person, guiding you through this exciting process.
They’ll help you navigate the negotiation battlefield to score the best purchase price possible. Remember, the lower the price, the bigger the potential profit. Cha-ching!
When making an offer, it’s time to bring your A-game. Consider the property’s market value, the estimated cost of renovations, and your budget. It’s like playing a strategic game of real estate chess.
But here’s the deal: sometimes, your offer might get the cold shoulder. Don’t sweat it! Rejection is part of the game. Take a deep breath, hold your head high, and don’t let it discourage you.
See it as an opportunity to reassess your strategy. Maybe an even better property is out there waiting for your flipping magic. So, stay positive, regroup, and keep pushing forward.
6. Determine Your House Projects
When you’ve bought your property, it’s time to roll up your sleeves and dive into the exciting world of house-flipping projects. This is where the real magic happens, folks!
Identify what needs your expert touch, from minor cosmetic updates to major structural fixes. Consider hiring an inspector to have a better idea of problem spots!
Don’t forget about the desires of potential buyers in the area. If it’s a family-friendly neighborhood, maybe a playroom or a spruced-up backyard would do the trick.
Choose your projects wisely, my friend. Not all property renovations will bring that big bang for your flipping home’s buck.
7. Make Your Timeline
Creating a solid timeline is the key to keeping renovations on track and making that flip a smashing success. So, let’s get down to business and talk timelines!
First, grab a notepad and jot down all the renovations that need to be tackled. From the biggies to the nitty-gritty details, list it all out.
Then, it’s time to estimate how long each project will take. Be realistic and consider the scope of work involved.
Don’t forget those sneaky factors that can throw a wrench in your plans—things like contractor availability, permits, and the potential for unexpected delays.
Let’s not overlook the time needed for staging and selling the property once the renovations are complete. They’re all part of the game, so factor them into your timeline like a pro.
8. Home Improvements Time
Now that your timeline is locked in, it’s time to roll up those sleeves and dive into the exciting world of home improvements.
This is where the magic happens for house-flipping investors, where your vision for the property starts taking shape.
When it comes to contractors, don’t settle for the first one that comes your way. Get multiple quotes and do your homework. Check those references, my friend!
And here’s a little nugget of wisdom: the cheapest quote isn’t always the best option. You want quality work and reliability, even if it means shelling out more.
Remember, cutting corners could lead to delays or subpar work, costing you precious moolah in the long run.
As your contractors start swinging those hammers, keep a watchful eye on their work progress and quality. Regularly check in on the property and maintain open communication with your contractors.
9. Sell Your Property
After all, you’ve gone through to find, buy, and renovate the property; it’s time to cash in on your hard work and sell that beauty. This is where you’ll hopefully see those dollar signs rolling in.
A good real estate agent can be worth their weight in gold during this process.
They’ll be your guiding light, helping you to price the property just right, get on the market like a pro, and work their negotiation magic with potential buyers.
Pricing the property is a delicate art. Take into account the cost of the renovations, the initial purchase price, and the current state of the real estate market.
You want to set a price that catches the attention of buyers and maximizes your profit. Remember, it’s not just about recouping your investment but making money.
Common House Flipping Mistakes
House flipping can be profitable, but it’s not without challenges. Even an experienced real estate investor can make mistakes impacting their bottom line.
By being aware of these common mistakes, you can avoid them and increase your chances of success.
Not Getting Funding
One of the most common mistakes new house flippers make is not securing adequate funding before starting their house-flipping project.
Real estate investing requires capital, and without sufficient funding, you may find yourself unable to complete renovations or even purchase a property in the first place.
Several options for funding a house flip include personal savings, hard money loans, and private lenders.
Each option has advantages and disadvantages, and understanding these is important before deciding on a funding source.
Going Over Budget
Another common mistake is going over budget or being too generous in your budget.
This can happen when house flippers underestimate the cost of renovations, encounter unexpected expenses, or fail to adequately plan for the financial risk of flipping a house.
To avoid going over budget, creating a detailed budget before starting your project to flip houses is crucial.
This should include the purchase price of the property, estimated repair costs, and any other expenses that might arise during the renovation process.
It’s also a good idea to factor in potential delays and unexpected costs, as these can impact your bottom line.
Hiring Bad (Cheap) Contractors
Hiring bad or cheap contractors is another common mistake that can cost you in the long run.
While it might be tempting to save money by hiring the cheapest contractor, this can often lead to subpar work, delays, and even additional costs to fix mistakes.
It’s worth paying a bit more for a contractor with a reputation for quality work and reliability. After all, quality can significantly impact property value and your potential profit.
It’s Not An Easy Side Hustle
Many people make the mistake of thinking that flipping houses is an easy side hustle. While it can be profitable, it requires significant time, effort, and expertise.
Flipping houses isn’t just about snagging a property and sitting back while its value skyrockets. Oh no, my friend, it’s a whole process.
You’ve got to research and get funding for a property, put work into improving it, and then ensure you make a profit when it sells.
Flipping Houses: Pros & Cons
- Potential for high profit
- Opportunity for creative expression
- You’ll learn a lot about real estate, construction, and the housing market
- You’ll have a tangible asset to improve and make money from
- There’s significant financial risk associated with flipping houses
- Flipping a house can be a time-consuming process
- Requires a wide range of skills
- Flipping houses can be stressful
Starting a business to flip houses is a great way to enter the real estate industry and make a profit. The house-flipping process can be an exciting venture, but it’s not without risks.
As you get started, take time to research and plan, find the right property, get the right financing, build a strong team, think ahead, and always have an exit plan.
Flipping houses can be a profitable investment with the right mindset and strategy. Hard work and patience will pay off in the long run. Now go out there and start flipping!