Flipping houses is on the rise. 114,706 single-family houses and condos were flipped in the first quarter of 2022. That number accounts for 9.6% of all U.S. housing transactions.<\/p>\n\n\n\n
Flipping houses can be one of the most lucrative small businesses to start\u2014and anyone can do it. All you need is a willingness to learn! However, it’ll come in handy if you have real estate investment experience or construction knowledge.<\/p>\n\n\n\n
You can flip houses part-time for some additional revenue, or you can become a full-time flipper.<\/p>\n\n\n\n
House flipping is a form of real estate investing where you buy a property, improve it, and then quickly sell it for a profit. <\/p>\n\n\n\n
The strategy behind it is to buy a home that\u2019s distressed, undergoing foreclosure, or undervalued for other reasons. After purchasing the home, you make the repairs and renovations to boost its value and then sell it immediately. House flipping is also known as a \u201cfix and flip.\u201d<\/p>\n\n\n\n
There are tons of great reasons to become a house flipper. Here are some of our favorites:<\/p>\n\n\n\n
Flipping houses can be very profitable, and you don\u2019t have to be a full-time flipper<\/a> to enjoy full-time profits. If you flip two houses a year and make $30,000 in profits from each, you\u2019ll enjoy $60,000 in additional revenue. If you flip a house every three months, you could easily break six figures<\/a>\u2014especially when using the tips and tricks found in this article.<\/p>\n\n\n\n Flipping houses provides you with many freedoms you can\u2019t get with other jobs. You can be your own boss, or co-run a house flipping business with a partner. You can choose to work on your schedule and pace, and take vacations whenever you\u2019d like. House flippers can also work from anywhere, and even remotely, under certain circumstances. <\/p>\n\n\n\n Anyone can break into real estate investing. You don\u2019t need to go to school or get a license to buy and refurbish a property.<\/p>\n\n\n\n However, you will benefit from having real estate investment or construction experience, or at least connections to people with these skills. We recommend working with an investor-friendly real estate agent, especially when you\u2019re just starting out. They can help you determine if a property is worth buying, its potential, and what repairs and renovations they\u2019d recommend. Also, they\u2019ll be incredibly helpful during the buying\/selling process.<\/p>\n\n\n\n You\u2019ll get a ton of investment property experience when flipping homes, including an intimate knowledge of the real estate market, construction, and design. This experience will be transferable to other forms of investing, including rental property investing, real estate notes, multifamily, and more. <\/p>\n\n\n\n But that\u2019s not all!<\/p>\n\n\n\n You\u2019ll also learn the basics of running your own business and everything associated with it. <\/p>\n\n\n\n House flipping is much cheaper than many other small business ventures. It doesn\u2019t require you to have any equipment, inventory, or employees. You need capital for a down payment and money for repairs and renovations, but there are a number of ways to get access to that capital, even if you don\u2019t have lots of cash in savings.<\/p>\n\n\n\n Like marriage, the first step in your real estate adventure is commitment. It’s easy to get excited about house flipping or landlording\u2014but can you actually commit to going the distance? House flipping isn’t a hobby. It’s a business that can dramatically affect your financial future, positively and negatively. Don’t go into this thing willy-nilly.<\/p>\n\n\n\n Decide you are going to do this. You’re 100% committed to learning everything you need to learn to get there. Then\u2014and only then\u2014should you move on to step two.<\/p>\n\n\n\n Don’t dive into the flipping game without doing some background research first. Here’s what you need to know.<\/p>\n\n\n\n Education is a lifelong pursuit\u2014but spend some extra time learning before jumping into a house flip. Don’t pay $50,000 for some kind of guru training camp. But you should take your education seriously and buckle down to learn the basics.<\/p>\n\n\n\n Start with The Book on Flipping Houses<\/a><\/em> written by J. Scott. If you’re planning on flipping houses and haven\u2019t read this book through at least once carefully\u2014and taken notes!\u2014you’re not doing enough. If you\u2019ve already read it, go back and read it again.<\/p>\n\n\n\n Next, start to teach your spouse (or kids, mom, dad, dog, cat, or hamster) what you\u2019ve learned. Teaching is the best way to internalize knowledge truly. Don\u2019t just review the surface details. Get deep, so you can truly understand how this stuff all works. You don\u2019t need to know everything but get good at the basics.<\/p>\n\n\n\n One last word of caution: Don\u2019t get caught in this cycle for too long. You\u2019ll never know everything, so dive into the education for a short while, learn all you can, and then move on.<\/p>\n\n\n\n Without the right math going into a flip, you\u2019ll never get the right money coming out of it. Understanding math is the number one most important trait in a successful flip because math determines how much you should pay, how much work to put into the property, and how much you expect to get out.<\/p>\n\n\n\n Start with the BiggerPockets House Flipping Calculator<\/a>. Play with the numbers, and you’ll find out how much you\u2019ll really make on a hypothetical flip.<\/p>\n\n\n\n Do the numbers by hand to ensure you understand the math behind the calculators. If you’re struggling with the numbers, ask for help in the Deal Analysis forum here on BiggerPockets<\/a>. There are thousands of investors there waiting to help.<\/p>\n\n\n\n Don\u2019t move on until you understand the math.<\/p>\n\n\n\n Next, take a look at the market and decide where the best place to flip will be. In some areas, $300,000 for a home would be absurdly cheap. In other places, $300,000 would be absurdly expensive. Every market is different, so you need to have a good handle on the market you plan to flip in. Ask yourself these questions.<\/p>\n\n\n\n Do a thorough job of understanding your local market. Walk through as many open houses as you can, spend time on your computer or phone and go on as many virtual tours you can, and meet with local experts to discuss the state of the local market and economy.<\/p>\n\n\n\n Then, cycle back to the math and see if flipping makes sense in that area.<\/p>\n\n\n\n You can’t flip a house alone. Yes, ambitious investors can do the bulk of the work themselves\u2014but you’ll still need a lender and a real estate agent.<\/p>\n\n\n\n At this point, you’re excited to get started. Don’t put the cart before the horse. First, ask yourself a very basic question: How are you going to pay for this flip?<\/p>\n\n\n\n There are a lot of different strategies you can use to finance your next house flip. Here are a few of the more common methods.<\/p>\n\n\n\n You have many different options, but you\u2019ll need to pick one to move on. Finalize whatever source you plan on using before shopping for your investment property, so you can quickly jump on it. In today\u2019s hot market, speed is key in getting a great deal.<\/p>\n\n\n\n At this point, you understand what makes a good deal good and have financing lined up. You’re ready to rock. However, you don’t need to do it all yourself. You need to find one team member: a real estate agent. Why? Because they’re free.<\/p>\n\n\n\n Yep, your seller pays the agent. So why not use one?<\/p>\n\n\n\n Your agent can open doors, write up offers, find comparable sales so you know what properties are really worth, and so much more. Engaging the agent who listed the property is a newbie mistake. If you do, you\u2019ll be dealing with the seller\u2019s agent, who has a legal obligation to encourage you to pay the most possible. This is like having an attorney who represents both the plaintiff and defendant in the same case. Do you really want that person helping you? Nope. Find a buyer’s agent.<\/p>\n\n\n\n One caveat here: If you plan to use direct mail to find your first flip\u2014aka sending letters to thousands of individuals, hoping a small percentage will turn into deals\u2014you don’t want an agent. The same applies if you are looking to buy homes FSBO (for sale by owner). Real estate agents are perfect if you plan to buy homes from the multiple listing service (MLS), where most homes are listed.<\/p>\n\n\n\n Before you start seriously searching, it’s good to think critically about what makes a deal right for you. This requires both good analytical skills and some time spent considering what fits in your portfolio\u2014or, if you’re just starting in real estate investing, what you want said portfolio to look like.<\/p>\n\n\n\n First, funnel all the possible choices down to specifics. This is when your education and market research come in handy. You want to flip houses that people want to buy\u2014so what kind of homes are they buying, and where? Think about things like:<\/p>\n\n\n\n Congratulations, that’s enough criteria to start filtering the properties on the market. Sometimes, however, a two-bedroom home could become a three-bedroom, or a one-bath house could become a two-bath, so keep your criteria broad.<\/p>\n\n\n\n Once you’ve made some decisions, let your agent know. They can set you up with automatic emails, which will alert you when suitable properties come on the market.<\/p>\n\n\n\n This is an important step in the process, so don\u2019t skip it. It\u2019s time to start doing some deal analysis on real properties.<\/p>\n\n\n\n Investing is a numbers game. Every property has a price that makes it a great deal. Your job is to find that sweet spot.<\/p>\n\n\n\n Let’s say you run the numbers and decide that you could pay $150,000 for a particular house. But it\u2019s listed at $275,000\u2014you can skip that one. However, if it’s been listed at $190,000 for the past four months, maybe the sellers will go down to $150,000. If it\u2019s at $160,000, you probably have an easy deal to put together. (But there may be reasons why the deal’s so easy!)<\/p>\n\n\n\n If you haven\u2019t yet, check out BiggerPockets’ House Flipping Calculator<\/a>, which will help you quickly plug in numbers to see the potential of any deal.<\/p>\n\n\n\n Before submitting an offer, you need to be extremely confident in your ability to judge a property’s potential. Head over to Zillow, Redfin, or Realtor.com and start pulling numbers for potential properties that look like good options. Do your best to make good assumptions about the rehab costs and other potential expenses. (It\u2019s more important to understand the process of analyzing these deals than to know the exact values right now.) This way, you’ll know what to do when you get a real potential deal across your desk.<\/p>\n\n\n\n Additionally, get out there and start physically looking at homes. Walk through as many as you can. Ask a lot of questions and learn as much as you can. This will not only help you find the best properties, but it will also motivate you, too.<\/p>\n\n\n\n Ask for help in the BiggerPockets Deal Analysis Forum<\/a> if you need some extra assistance.<\/p>\n\n\n\n In addition to looking on the MLS, it\u2019s not a bad idea either to get in your car and start driving around, hunting for potential deals.<\/p>\n\n\n\n In the real estate investing industry, we often call this “driving for dollars.” Look for properties that are vacant or need some serious cosmetic help. If you can find the owners through public records, you’ll often find them very willing to sell for a great deal.<\/p>\n\n\n\n After walking through and analyzing dozens of properties and talking with your agent about your needs, eventually you’ll find the perfect flip. You may find one right away, or it may take months. Don\u2019t worry about how long it takes\u2014focus on finding the best deal possible. You don\u2019t want anxiety to impede your financial future. Be patient and stick to your criteria.<\/p>\n\n\n\n Don\u2019t let emotion take over the deal.<\/p>\n\n\n\n Excitement is inevitable. After all, you\u2019ve put a lot of work into this project and you really want to see everything come together. However, this is no time to toss out everything you\u2019ve learned. Stay calm, stick to your numbers, and get ready for the real excitement to start.<\/p>\n\n\n\n Once you’ve identified a great property for your fix and flip, it’s time to move on to the next step\u2014often the most anxiety-inducing. Yep, it’s time to make an offer and get under contract. Here’s how.<\/p>\n\n\n\n Typically, the buyer will present the seller with a proposal in real estate negotiations. It includes things like:<\/p>\n\n\n\n If you found the property through your real estate agent, they’ll help you through this entire process. It’s actually fairly easy. However, if you found the property yourself\u2014such as through social, word of mouth, driving for dollars, or direct mail\u2014you won’t have the luxury of a real estate agent on your side.<\/p>\n\n\n\n So if this is your first time, it is recommended that you hire an attorney or a real estate agent to review the paperwork and ensure you aren’t missing out on anything.<\/p>\n\n\n\n A “contingency” refers to the parts of a legal offer that are “escape clauses.” In other words, these are things that let you walk away from the deal without losing your earnest money. For example, you might have a contingency that says, “This offer is contingent upon my cat fitting through the cat door”\u2014though I wouldn’t recommend it. Too many contingencies make a seller reluctant to accept your offer, but too few can put you in a difficult place.<\/p>\n\n\n\n So what contingencies should you include? Here are the most common.<\/p>\n\n\n\n Keep in mind that the fewer contingencies you have, the greater chance your offer will be accepted. Many investors choose to avoid contingencies altogether to make their offers stronger. This obviously opens the investor to greater risk, so I only recommend this for experienced investors.<\/p>\n\n\n\n After you submit your offer, it\u2019s time to wait.<\/p>\n\n\n\n Usually, the seller will send a counteroffer (via your agent, if you have one) that explains what they want from the transaction. You can choose to accept, reject, or send them a counteroffer. But the seller can also simply accept your offer and end negotiations, though this is generally not the case.<\/p>\n\n\n\n During negotiations, it\u2019s vital that you stick to your predetermined numbers. Emotions run high during this phase, and you may be tempted to raise your price, making the numbers unworkable. Don\u2019t do this! Stick with what you know will work\u2014and be willing to lose the deal if you can\u2019t reach an agreement.<\/p>\n\n\n\n In the end, one of two scenarios will occur:<\/p>\n\n\n\n If you can\u2019t come to an agreement, the deal may not be lost. I\u2019ve bought numerous rental properties that were originally turned down. I once offered $65,000 on a property, and the offer was rejected. Six months later, however, after numerous price drops, I offered $45,000, and it was accepted! So don\u2019t be afraid to wait it out. Stick to your number, and maybe later\u2014whether that’s weeks, months, or years\u2014the seller will be more motivated.<\/p>\n\n\n\n Once both parties agree on a price and terms, you\u2019ll need to pay the earnest money to make it all official.<\/p>\n\n\n\n Some agents prefer you give this money with the offer, but I try to wait until an offer is accepted before handing my money over to someone I don\u2019t know. This is especially important when you make a lot of offers. Regardless of whether you’re working with a real estate agent or directly with a seller, this money is never held by the seller themselves. This money should be kept by a third party\u2014typically the title company or an attorney who will be closing the deal.<\/p>\n\n\n\n Next, the paperwork moves over to either a title\/escrow company or an attorney, depending on your state. From this point forward, I\u2019ll probably just refer to title companies, but if you are in a state that uses attorneys, they serve the same function.<\/p>\n\n\n\n The title company is responsible for getting the deal closed. They will check the property for liens or other problems with the title, as well as prepare documents and schedule times for everyone to sign the paperwork.<\/p>\n\n\n\n Typically, if you are working with a real estate agent, your agent will suggest their favorite company\u2014or the seller may ask that you use their favorite. If you work directly with a seller, don\u2019t be afraid to ask a few agents which company they prefer.<\/p>\n\n\n\n You’re under contract. Hooray! While you wait for the deal to close, it’s time to get your ducks in a row so you can start work immediately once you have your keys.<\/p>\n\n\n\n Once the house is under contract, hire a professional inspector immediately to look through the property. Unless you are a contractor yourself, this is not a place to cut corners. A qualified, licensed home inspector can tell you a lot about the property you are about to buy\u2014including the things you probably wouldn’t notice yourself, such as the wiring, plumbing, and roof condition.<\/p>\n\n\n\n I recommend physically being at the property during the inspection\u2014and asking a lot of questions. The information you learn will serve you for years as you pursue flipping houses more efficiently.<\/p>\n\n\n\n A home inspection typically runs between $400 and $600 for a typical single-family home and higher for multifamily properties. Again, this is no place to skimp.<\/p>\n\n\n\n One final note on the inspection: A home inspector\u2019s job is to find problems, so don\u2019t be scared when you get a 20-page list. I\u2019ve never purchased a property that didn\u2019t have at least 50 things needing fixing. No property is perfect. You’re looking for properties that have no major problems, such as a bad roof or foundation unless you’re already budgeted to fix that problem up.<\/p>\n\n\n\n You also may not want to fix every single thing in the inspection report. The inspector will usually let you know what\u2019s most important and what’s just a good idea. For example, you\u2019ll probably want to fix a roof leak, but you may not want to fix a bent gutter on the back of the home.<\/p>\n\n\n\n After the inspection, you will have one of three choices:<\/p>\n\n\n\n If everything looks good, you’ll sign a document letting the sellers know you accept the condition. But what if there are serious, game-changing problems?<\/p>\n\n\n\n I would recommend not pursuing step two without considering step three first. For example, let’s say you discovered that the home needs to be totally re-wired. Don\u2019t immediately run. Instead, ask the seller to fix the problem or credit you the cost after closing. After all, now the seller knows about the problem. Legally, they’ll have to disclose the problem to future buyers\u2014so attempt to salvage the deal if possible.<\/p>\n\n\n\n Make a detailed list of everything that needs to be completed on the project in order to get it ready to sell.<\/p>\n\n\n\n You could complete this step before the offer is accepted, but I usually only create a \u201clight\u201d scope of work. Why waste time on deals that won\u2019t ever happen? Plus, the inspection will provide a detailed list of problems that you can refer to.<\/p>\n\n\n\n If you don’t plan to do the work yourself, work with a qualified contractor to bid out these tasks. You don\u2019t want to buy the property and suddenly realize your to-do list is much more expensive than anticipated. This is the fastest way to lose a lot of money and fail at your house-flipping business.<\/p>\n\n\n\n This step could actually be done at any point beforehand\u2014but now is a great time, if you haven’t already hired a contractor. If work is needed and you don\u2019t plan to DIY, it\u2019s time to find some dependable contractors.<\/p>\n\n\n\n We\u2019ve asked dozens of guests on the BiggerPockets Podcast<\/a> how they find good contractors and, by and large, this seems to be a difficult task for investors. I recommend approaching it like a business by proactively seeking out the best contractors.<\/p>\n\n\n\n The best way to find a good contractor is via a referral from another real estate investor, house flipper, or property manager. Always get multiple bids from different contractors\u2014but don’t assume that cheapest equals best. I believe there are three (loosely defined) types of contractors.<\/p>\n\n\n\n Be sure to get all bids in writing\u2014and with details. If the contractor says they will paint the exterior for $2,500, does that include the doors? Does that include pressure washing? Get down to the nitty-gritty and get it all in writing. It will save everyone stress in the future.<\/p>\n\n\n\n You will likely need several different contractors to do different parts of the job. Be sure to coordinate who will do what and when. Also, determine how you will pay the contractor.<\/p>\n\n\n\n If estimating rehab costs is not on your list of skills, I\u2019d recommend checking out The Book on Estimating Rehab Costs<\/a><\/em>, which comes free with The Book on Flipping Houses<\/a><\/em> by J. Scott.<\/p>\n\n\n\n There are a number of tasks you’ll need to complete during your due diligence period. For example, during this time, you will want to:<\/p>\n\n\n\n It\u2019s also important to create a schedule for completing the flip. As the person in charge, you must ensure work is getting done quickly\u2014which means planning the flip’s different phases with your contractors to ensure there are no \u201cdead days\u201d where nothing gets done.<\/p>\n\n\n\n Finally, all your work is about to pay off. But it\u2019s not the end of the journey\u2014it\u2019s just the beginning!<\/p>\n\n\n\n Your title and escrow company will schedule a time for you to come in and sign the paperwork. Depending on your state’s laws and traditions, you may or may not actually sit down with the seller at the closing table. At this time, the money from your lender (or your checking account) will be wired to the title company (or attorney), who is responsible for making sure the correct amount is paid to each party.<\/p>\n\n\n\n Finally, the title company will send the deed to the county to be recorded. Property ownership will officially pass to you!<\/p>\n\n\n\n Congratulations\u2014you are an investment property owner! Now it’s time to get to work.<\/p>\n\n\n\n Hopefully, you organized your rehab schedule during due diligence, so everything should run smoothly. Just kidding: Flipping houses is never easy! But proper prep does make things move along more smoothly. Your contractor should be ready to dive in on day one.<\/p>\n\n\n\n Unless you hire a project manager, your job is to ensure the contractors are doing the work that they’re supposed to when it’s supposed to be done. Contractors are notorious for taking significantly longer than they originally said\u2014and without pressure from you, they\u2019ll take even longer.<\/p>\n\n\n\n You\u2019ll also need to ensure bills are being paid, including the utilities, contractors, and supplies. Keeping a close eye on the bills ensures you stay on budget. But keep in mind that budgeting can be one of the most frustrating parts of house flipping\u2014especially if you’re not prepared.<\/p>\n\n\n\n Go overboard on organization. There may be hundreds of receipts, bids, and documents floating around, but take a few moments every single day to organize them and enter them into a spreadsheet so you can keep track of your spending.<\/p>\n\n\n\n Once all the contractors finish, I create a final “punch list” of things that they forget.<\/p>\n\n\n\n No matter how good the contractor is, they will miss some small details. It\u2019s your job to go in, create a punch list, and get those things knocked out as quickly as possible. And don\u2019t pay the contractor until this is all done!<\/p>\n\n\n\n Here is an example punch list to give you a better understanding of how yours might look:<\/p>\n\n\n\n Painting:<\/p>\n\n\n\n Flooring:<\/p>\n\n\n\n Electrical:<\/p>\n\n\n\n Plumbing:<\/p>\n\n\n\n Doors and windows:<\/p>\n\n\n\n Cabinetry and countertops:<\/p>\n\n\n\n HVAC system:<\/p>\n\n\n\n Thanks to your hard work and dedication\u2014and, let’s be honest, money\u2014the in-need-of-rehab property you purchased is now ready to go back on the market. Here’s how to get the most money from your flip.<\/p>\n\n\n\n Staging is the practice of placing furniture, wall art, knickknacks, and other objects throughout the home to make it look more lived-in. Although it may seem counterintuitive, most real estate experts agree that staged homes sell faster and for more money.<\/p>\n\n\n\n You can hire professional staging companies to replace your flip with furniture. You can also save money by heading to your local furniture rental company\u2014the rent-to-own ones\u2014and having them stage the home for you for several months.<\/p>\n\n\n\n If you have a tight budget, consider just installing cheap curtains and picking up inexpensive house plants. Small changes can do wonders.<\/p>\n\n\n\n Finally, the property is finished\u2014and it looks fantastic. It\u2019s time to list the home for sale. Although you could list it “for sale by owner,” most investors list it with a real estate agent who can place it on the MLS for maximum exposure.<\/p>\n\n\n\n You will sign an agreement with a listing agent that spells out things like the sale price, the commission, and how long the listing agreement will last.<\/p>\n\n\n\n Before actually listing the home, your agent will look at comparable properties in the neighborhood that have recently sold and come up with a great listing price. Although you looked at the comps when you started the whole process, the real estate market may have changed. Make sure you reevaluate your pricing strategy to ensure you’re being competitive.<\/p>\n\n\n\n While the home is on the market, there aren’t a ton of things you personally can do besides maintaining the home and answering your agent’s questions when they come up.<\/p>\n\n\n\n However, your agent can do quite a bit\u2014so make sure they are! Ask for weekly reports (or better yet, have a phone conversation about the progress at least once per week) and ensure your agent is prioritizing your property.<\/p>\n\n\n\n It may feel like time to break out the Champagne, but keep that cork closed.<\/p>\n\n\n\n In my experience, 50% of offers don’t turn into sales. Don\u2019t count your chickens before they hatch.<\/p>\n\n\n\n Instead, look at the offer for what it is: a business proposal. How does it look financially? Are they offering enough\u2014or is it a lowball? What about contingencies? Are the buyers pre-approved for a loan? Do they appear to be serious?<\/p>\n\n\n\n Review the offer with a (figurative) magnifying glass and discuss it with your spouse, agent, and investing partner.<\/p>\n\n\n\n Chances are you won’t simply accept the offer as presented\u2014though there is no rule that says you can\u2019t if it’s a great offer. Instead, you\u2019ll probably want to \u201ccounter\u201d the offer with one suits your strategy better. Most real estate buyers and sellers expect a little back-and-forth, so don\u2019t be afraid to counter with a slightly higher number. Most buyers won\u2019t run for the hills.<\/p>\n\n\n\n The paperwork may go back and forth a few times, and in the end you\u2019ll either have a signed deal, or the agreement will fail and you\u2019ll both go your own ways. Hopefully, however, you find success and can move on.<\/p>\n\n\n\n Just as you did your due diligence, now your buyer will do the same. They’ll probably hire a professional inspector to walk through the property and find every problem they can.<\/p>\n\n\n\n I\u2019ll offer the same advice here as I did earlier: An inspector\u2019s job is to find every problem. Even after a complete rehab, the buyer will likely get back several pages of problems. The buyer may ask you to fix a lot of those problems, and the choice is yours as to whether or not you will. If you don\u2019t, they may walk away from the deal. Consider each repair carefully and do what you can to keep the deal together.<\/p>\n\n\n\n During this process, the buyer will also be finalizing their financing and doing the necessary steps needed to buy the home.<\/p>\n\n\n\n You will likely communicate with the title company or attorney several times concerning loan payoff amounts. Be as prompt as possible in returning phone calls to ensure the sale goes as smoothly as possible.<\/p>\n\n\n\n On the day of closing\u2014or several days before\u2014you will sit down at a big table and sign the closing documents at the title company. Inspect this paperwork carefully for mistakes. If you find any errors, immediately address them with the closing agent.<\/p>\n\n\n\n The title company will handle all the payments, accepting the incoming funds from the buyer and paying off your loan on the property. They’ll give you a cashier\u2019s check (or a bank wire) for the difference.<\/p>\n\n\n\n One final note: These funds are not all yours to keep. Instead, any profit needs to be shared with the government when tax time comes. House flipping is generally considered \u201cactive\u201d income and therefore taxed at the highest levels. However, good tax planning can help avoid a good portion of the taxes due\u2014so be sure to seek out a qualified tax professional before selling your flip.<\/p>\n\n\n\n Finally, take your profit and sink it into the next flip. Or use it as a cash infusion to buy rental properties or real estate notes. House flipping can be a lot of fun, but it is active income, so continue to build up your passive income at the same time to create real wealth.<\/p>\n\n\n\n There you have it: 30 steps for completing the perfect house flip!<\/p>\n\n\n\n If you’re serious about flipping houses, don\u2019t rely on this blog post alone. Dive into the educational world of house flipping by checking out The Book on Flipping Houses<\/em><\/a> by J. Scott.<\/p>\n\n\n\n Don\u2019t let your flip become a flop. Here are some of the most common mistakes<\/a> novices and pro flippers make:<\/p>\n\n\n\n Never jump a deal without first securing financing. Making $40,000 in repairs and renovations is much harder if you only have $15,000 to spend. You have plenty of loan options available\u2014many of which we will cover later in this post. Just don\u2019t forget to factor interest into your bottom line.<\/p>\n\n\n\n House flipping is a popular way to invest in real estate, but it’s important to consider the timeline for buying a house<\/a> when deciding if it’s the right strategy for you. The longer you own the home, the more it will cost you. Repairs and renovations often bite into your nights and weekends. Marketing your home and finding buyers also takes a lot of time. If you\u2019re unable to devote the hours required to maximize your profits or outsource the work to professionals, the potential returns on your investment may quickly dwindle.<\/p>\n\n\n\n Time should be a driving factor for house flippers, but it\u2019s not the only one. Rushing the process can lead to costly mistakes. Take the time necessary to hire the right people and make the most of your budget. Sometimes taking an extra month can net you tens of thousands in gross profits. <\/p>\n\n\n\n Rehabbing a home requires more than a few hammered nails and a fresh coat of paint. Distressed properties need a lot of work, especially if there are structural issues. Hire an inspector to thoroughly examine the property and list everything that needs to be done. Chances are you won\u2019t be able to fix everything by yourself. If you can\u2019t, hire experts who can! <\/p>\n\n\n\n Real estate investors often simplify their investment strategies by living by the mantra \u201cbuy low and sell high.\u201d When it comes to flipping houses, there\u2019s a lot more to it. <\/p>\n\n\n\n In this section, we\u2019ll cover the 70% rule and all the costs associated with flipping a house.<\/p>\n\n\n\n Angela is considering buying a triplex and renting out the other two units for $1,200 each. She\u2019s budgeting $100 a month in operating expenses and $150 in capital expenditures. She also assumes each unit may be vacant for one month a year. <\/p>\n\n\n\n One of the easiest ways to assess whether you should buy a home is to use the 70% rule. Your home\u2019s purchase price should equal 70% or less of the property\u2019s after-repair value (ARV) minus repairs and renovations. Simply put:<\/p>\n\n\n\n ARV x 70% – Repairs and Renovations = Maximum purchase price<\/p>\n\n\n\n Following the 70% rule will minimize your chances of taking on added financial risks by overspending on a property.<\/p>\n\n\n\n Let\u2019s say Elena finds a fixer-upper on sale for $235,000. She knows that comparable homes in the neighborhood are worth $400,000, and her power team estimates the cost of repairs and renovations will be $40,000.<\/p>\n\n\n\n $400,000 x 70% – $40,000 = $240,000<\/p>\n\n\n\n If Elena purchases this at $235,000, she will be under the 70% rule by $5,000. By that logic, the gross profit for flipping this house is $125,000 ($400,000 – $235,000 – $40,000). <\/p>\n\n\n\n The key term here is \u201cgross profit.\u201d Most of us would love to make a $125,000 profit on every house we flip, but repairs and renovations aren\u2019t the only costs. You also have to consider:<\/p>\n\n\n\n We\u2019ll continue to use Elena\u2019s scenario when determining what\u2019s included in each:<\/p>\n<\/div>\n<\/div>\n\n\n\n Purchase costs are fixed expenses<\/a> that contribute to the purchase of a property. In addition to Elena\u2019s down payment, her purchase costs include:<\/p>\n\n\n\n Know your comps and know your area. The more you understand why people are paying the price they\u2019re paying for local comps, the better you can design a house to fit the price point and secure an above-market offer! Learn more from James: <\/strong><\/p>\n\n\n\nYou\u2019ll Enjoy the Flexibility<\/h3>\n\n\n\n
You Don\u2019t Need Special Licenses, Certifications, or a Degree<\/h3>\n\n\n\n
You\u2019ll Learn a Lot About Real Estate Investing<\/h3>\n\n\n\n
Your Startup Costs are Minimal<\/h3>\n\n\n\n
How to Start Flipping Houses Step By Step<\/h2>\n\n\n\n
\n\n\n\nStep 1: Commit to the flip<\/h3>\n\n\n\n
\n\n\n\nSteps 2\u20134: Educate yourself<\/h3>\n\n\n\n
2. Educate yourself on flipping houses<\/h4>\n\n\n\n
3. Learn the flipping math<\/h4>\n\n\n\n
4. Market research<\/h4>\n\n\n\n
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\n\n\n\nSteps 5\u20136: Find your partners<\/h3>\n\n\n\n
5. Arrange your flip financing<\/h4>\n\n\n\n
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6. Find a real estate agent<\/h4>\n\n\n\n
\n\n\n\nStep 7\u201310: Find the best deal for you<\/h3>\n\n\n\n
7. Define your prospective deal<\/h4>\n\n\n\n
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8. Analyze potential deals<\/h4>\n\n\n\n
9. Start driving for dollars<\/h4>\n\n\n\n
10. Find the perfect house<\/h4>\n\n\n\n
\n\n\n\nSteps 11\u201315: Start your deal right<\/h3>\n\n\n\n
11. Make an offer<\/h4>\n\n\n\n
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12. Deal with contingencies<\/h4>\n\n\n\n
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13. Negotiate<\/h4>\n\n\n\n
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14. Send the earnest money<\/h4>\n\n\n\n
15. Pick a title or escrow company or attorney<\/h4>\n\n\n\n
\n\n\n\nSteps 16\u201320: Prep for the flip<\/h3>\n\n\n\n
16. Get an inspection<\/h4>\n\n\n\n
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17. Create the scope of work<\/h4>\n\n\n\n
18. Find great contractors<\/h4>\n\n\n\n
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19. Finish your due diligence<\/h4>\n\n\n\n
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20. Close on the property<\/h4>\n\n\n\n
\n\n\n\nSteps 21\u201323: Rehab the property<\/h3>\n\n\n\n
21. Manage the rehab<\/h4>\n\n\n\n
22. Manage the financials<\/h4>\n\n\n\n
23. Make your final punch list<\/h4>\n\n\n\n
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\n\n\n\nSteps 24\u201330: Sell the property<\/h3>\n\n\n\n
24. Consider staging<\/h4>\n\n\n\n
25. List the home on the MLS<\/h4>\n\n\n\n
26. Have your agent keep tabs on the property<\/h4>\n\n\n\n
27. Get an offer (but don\u2019t celebrate yet)<\/h4>\n\n\n\n
28. Negotiate a fair price<\/h4>\n\n\n\n
29. Allow a due diligence period<\/h4>\n\n\n\n
30. Close on the sale, pay taxes and move on<\/h4>\n\n\n\n
Common Pitfalls of Flipping Houses<\/h2>\n\n\n\n
Lack of money<\/h3>\n\n\n\n
Lack of time<\/h3>\n\n\n\n
Lack of patience<\/h3>\n\n\n\n
Lack of due diligence<\/h3>\n\n\n\n
How Much Does Flipping Houses Cost? Gross and Net Profit<\/h2>\n\n\n\n
The 70% rule<\/h3>\n\n\n\n
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Purchase costs<\/h3>\n\n\n\n
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Purchase Costs<\/th> <\/th><\/tr><\/thead> Expense<\/strong><\/td> Amount<\/strong><\/td><\/tr> Down payment<\/td> $47,000($235,000 x .20)<\/td><\/tr> Hard money loan<\/td> $188,000($235,000 – $47,000)<\/td><\/tr> Inspection costs<\/td> $400<\/td><\/tr> Closing costs (let\u2019s assume they are 3%)<\/td> $7,050($235,000 x .03)<\/td><\/tr> Lenders fees<\/td> $1,400<\/td><\/tr> Total purchase costs:<\/strong><\/td> $243,850<\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n