Here are all the steps you need to follow in order to successfully flip a house.
1. Determine Your Budget and Plan of Attack
You need to decide just how much money you can actually sink into the project. This can be a combination of personal money and business loans. If you know how much you can spend, you will have a better idea of the kinds of markets you can afford to shop in.
As a general rule, the smaller the amount of money you have to begin with, the farther away from the city center you are going to be. Your homes also will not be in the “best” neighborhoods. However, this is completely fine. This is because you will then be able to spend the majority of your budget on renovations instead of the initial purchase price.
Quick tip: if you flip houses in lower-income areas, you will likely not be selling to an owner-occupier (an industry term for a home buyer who plans to make the property their primary residence), but rather to investors who plan to act as landlords. This might mean lower profit margins, but the overall sales process will be easier.
For your first few flips, your business plan should be as simple as you can possibly make it. You should avoid homes with major structural problems to fix and instead focus on cosmetic features. This is because these structural problems can easily spiral out of control and cause you to go over your budget (and run out of patience!) in no time.
2. Secure the Financing
Once you have your budget set and your plan in place, it’s time to start lining up your financing, especially if you need loans from a third party. It’s a rookie mistake, but a lot of first time house flippers wait until they need the money before they ask for it.
Don’t let this be you! Start approaching investors about potential partnerships well before you actually need the money. This way, when the first few deals fall through (because it’s very likely that they will) you have a bit of wiggle room before the bills are due for your renovations. Be ready with a pre-approval letter.
There are many different kinds of loans available for flipping houses. You can read all about them here.
3. Pull Together Your Dream Team
You can’t flip houses all on your own. Even if you’re a master plumber, electrician, and carpenter extraordinaire, revamping an entire home, especially for the first time, is going to take a small army.
So, as you begin looking for houses to flip, begin making calls to local contractors about a potential partnership. If you have some buddies who are tradesmen who want to work with you, that’s great! Just be sure to still draw up official contracts with each of them before the work begins. This is because the stress of flipping a house is a surefire way to eat away at friendships otherwise.
4. Find a House To Flip
As you can see, much of the work on this ultimate flipping a house checklist occurs before you even have a house to flip in mind. This is because the more preparation that you do, the easier you’ll find the entire process to be.
So, once you have a budget, business plan, financing, and contractors in place, it’s time to start putting feelers out for your first house.
You’ll want to make sure that you are finding good deals. You will need to buy a house below market value, which is typically why a lot of people prefer to purchase foreclosed upon or “Zombie” houses to flip. This is because the profit from the eventual sale needs to cover two sets of closing costs, renovation costs, Realtor fees, and contractor fees.
It’s likely that you are going to have to tour many houses and make lots of offers before one sticks. That’s fine. You should expect this.
5. Make an Offer and Close on the House
It’s finally time to buy the house! It’s likely that you will be competing against other home investors when making offers, and often times these investors will be significantly more experienced than you.
The key is not to worry about it and keep making offers until something sticks. However, one thing that you will need to do that more experienced investors might not need to do is to hire a home inspector.
This is because while they might be able to afford both the financial and timeline setbacks of unexpected repairs, those who are just starting out will not be able to do this.
6. Renovations Begin
Now it’s officially time to start renovating the home! Two things that are important to keep in mind while renovating: the quality of the work and long it’s taking to get it done. This is because from the moment you close on the property you are responsible for paying the taxes and utilities for it. And, if you didn’t pay in all cash, the mortgage.
Here’s a room-by-room checklist of what you should spruce up:General Exterior
- HCAV System
- Patio / Deck
- Septic System
- Baseboards, moldings, and trim
- Drywall Installation
- Electrical box wiring and protection
- Framing of walls
- Furniture staging
- Tub and Shower
7. Sell it!
The home looks a million times better than when you first got your hands onto it. Now, it’s time to sell it and secure the profit you’ve been after this entire time.
It’s easier to just hire a Realtor to handle this bit of the process for you. While you should have a bigger say in setting the price of your property than on a typical sale, partnering with someone who has industry-specific connections will be a bigger help than a hindrance to find you the best buyer. If you are worried about high commission fees, you should consider partnering with a flat fee agent, .
Because flat fee agents are so inexpensive, it makes way more sense for your business not to go through the trouble of obtaining your own Realtor’s license, especially if you are just starting out.