How to Start a House Flipping Business

House flipping can be an extremely lucrative and enjoyable way to make a living. It’s certainly not for everyone -- enjoying house flipping shows on HGTV isn’t a sufficient qualification -- but if you have a passion for real estate and hard work, you can make great returns as a house flipper in markets across the country.

So what are the steps for starting a house flipping business? Here are four steps that we urge any new flipper to consider:

1. Talk to experienced house flippers.

Before you dive into house flipping, seek out someone with a good amount of experience flipping houses and have an indepth conversation about the job. This, in our opinion, is a much better way to get a sense of just how much work goes into flipping houses and whether or not you would enjoy the work than taking a seminar or reading a how-to book. Learning from someone else’s firsthand experience will help you avoid rookie mistakes, give you a friendly contact you can turn to when you run into problems, and help you decide if house flipping is actually for you.

2. Think about quitting your day job.

This is probably the opposite of what you expected to hear. But the truth of the matter is that house flipping is full time work. You cannot manage flips on the weekends and after hours. For one thing, you’ll end up working yourself to the bone. For another, you’ll almost certainly spend much too long on your flip, eating away your potential profits.

If you want to flip houses as a hobby and the money isn’t all that important to you, then you could probably maintain a not-too-demanding job. The other alternative is to have an exceptional team behind you who handles all of the day-to-day work of the flip. Such a team takes years to put together, so don’t expect to start with this strategy. If you’re not ready to give 100% of your work time to your house flipping business, you are likely to run into a lot of problems.

3. Find funding.

Virtually no house flippers pay for their housing investments entirely out of their own pockets. House flippers partner with lenders to help them invest in more flips at a time and better leverage their own capital.

In order to get started flipping houses, you’ll need about 20% to 30% of the purchase price in liquid assets. The rest you should plan to get through house flipping loans or joint ventures. The most reliable and useful source of funding for house flipping is usually private money lenders. Such lenders should be invested in your success and want to develop a long-term relationship with you. As you flip more houses, your lender should be able to offer better and better terms.

4. Overthink it.

You’ll never feel more anxious to pull the trigger on a home purchase than you do before your very first flip. This is where patience and diligence become extremely important for the novice house flipper.

It is essential to do your research and make sure you have an extremely thorough understanding of your projected budget, your costs, your limitations, and your contingencies before you take the plunge and buy a property to flip. Of course, at some point you have to make an offer and get your hands dirty, knowing that you will inevitably make mistakes during your first flip. But the more prepared you can be before starting the actual flip process, the more money you will save your budding business.