Flipping Houses for Profit – Tips for How to Flip a House

[Riki Roy]

Several years ago, I became friends with a young woman who was just getting started in real estate. She became a real estate agent, and then started learning about renovation. She bought her first house, flipped it, and made a ton of money. Thanks to some exceptionally lucky circumstances, and some serious persistence on her part, she ended up on an HGTV show about flipping houses. She appeared in several episodes of the show, because she was part of an often-featured investor team in Atlanta.

I asked her one day if flipping houses was as easy as it looked on TV. After all, the show made it look very easy. You find a cheap home for sale. Put some money and sweat equity into fixing it up, and then resell the house for a huge profit. House flippers can make enormous profits on a sale. Could it really be that simple? She laughed, shaking her head. “We make it look easy,” she said. “But it’s risky, back-breaking work. It can be fun, but if you don’t know what you’re doing, you’re sunk.”

Enter the world of house flipping.

What Is House Flipping?

House flipping is when real estate investors buy homes, usually at auction, and then resell them at a profit months down the road. Can you make money doing this? Yes. Can you make a lot of money doing this? Yes. But you can also lose everything you own if you make a bad decision.

House Flipping Requirements:

You can find some real bargains in the real estate market. In fact, there are 1-2 million foreclosed homes for sale right now, and the Wall Street Journal reports that another 7.5 million U.S. homeowners are either behind on their payments, or in the foreclosure process.

Thanks to tighter lending standards, and a depressed buying market, you need plenty of cash, and nerves of steel, to get into house flipping. Imagine buying a house for $50,000, investing another $20,000 in renovations, and then…nothing. No one wants to buy the house. You now have to pay for your own rent or mortgage, plus the mortgage for this home, and utilities, insurance, and property taxes.

What Makes a Good Real Estate Investment?

So what should you look for in a potential house flip?

Location. Expert house flippers can’t stress this enough. Find a home in a desirable neighborhood, or in a city where people want to live. In a down market, like the one that exists today, finding a superior location can be a challenge. Start by researching local cities and neighborhoods. Look for areas with rising real estate sales, employment growth, and other indications that the town will rebound from the recession.

Sound Condition. You don’t want to tear the house down, and start rebuilding it from scratch. Look for structurally sound homes. You may not have the opportunity to have a home inspected, especially if you buy the home at a real estate auction. You need to learn what to look for, or bring someone knowledgeable about building, electric, and plumbing with you to look at the home, to determine if the home is structurally sound.

Good Schools. Homes in a good school district sell more quickly.

How to Flip a House

1.Get Educated:

You can’t find a cheap house online, buy it, and then sell it for a profit. If flipping were that easy, we’d all be real estate billionaires. You must educate yourself before you even start looking at homes. What do you need to know?

Understand the ins and outs of your local real estate market. Where do people want to live, right now? What kind of house do people want to buy, right now? Don’t speculate about up and coming neighborhoods. Remember, you want this house sold fast.

Become an expert on home financing options. Will you buy a house with cash? Will you apply for a home mortgage loan, or take out a HELOC? Make sure you understand the ins and outs of home financing before you apply for a loan, or make an offer on a house.

Don’t avoid the tough questions as you enter the house flipping process. Analyze how much house you can afford, and how much you can afford to lose on any deal.

2. Find a Mentor:

If you know a successful house flipper, ask him to be your mentor. You might even want to consider offering him an incentive to mentor you. For example, in exchange for his hard-won knowledge and advice, you give him a small percentage of your first profit. This way, the mentor is motivated to tutor you, and you ensure the quality of your education. Offering a financial 

incentive also enables you to approach experts you don’t know personally, since they will be compensated for their efforts.

3. Research Listings and Foreclosures:

Many websites provide foreclosure listings. Some of the most popular include:

RealtyTrac

Foreclosure.com

Re/Max

Once you find a home you want to buy, check out that home’s background with BuildFax. For $39, BuildFax provides a comprehensive background check on a home. You can review extensive details about the house’s history, including repairs, remodeling, and additions.