Flipping houses can be fun as well as profitable, if you know how to do it well. New flippers who jump in too fast, however, learn some valuable lessons the hard way and rarely turn a profit on their first several houses.
But that doesn’t have to be you. A successful, profitable flip starts with a thorough strategy and the perfect property, completes the right renovations on schedule, and sells quickly.
And you can nail each of those steps fast by learning from some of the experienced house flippers we have worked with in the past.
A Profitable Flip Starts Before You See the House
Before you start knocking down drywall—before you even start shopping—set yourself up for an efficient, successful flip.
1. Make sure you have enough cash.
You generally need about 25% of a house’s value for a down payment. You won’t know exactly what that dollar amount is until you find a property, but it’s not nothing. A bit of cash-on-hand is necessary to get started.
Take a look at what you’ve got today, multiply it by four, and see where that puts your price range. Is it enough for a flip-able property in your area?
2. Get a rough idea of what common repairs and expenses cost.
If you’re just getting started with house flipping, do a little bit of preliminary research on common expenses and repair costs. Start talking to local contractors and specialists about things like flooring per square foot, professional inspections, tiling, etc.
Experienced flippers are used to some of these numbers, which makes it much easier to walk through a property and get a rough feel for how much renovations might cost. It’s a skill that has to be built over time, but you can jump the curve a little bit by being proactive.
3. Start talking with potential buyers.
Yes, now. If this is a first or second flip, you won’t have much of a network built up yet, but now is the time to start. Talk to local real estate agents, scan social media groups, and visit open houses.
Seasoned flippers can sometimes line up a buyer before they even start repairs. You might not get that far without a good reputation, but just having a network of potentially interested buyers can dramatically shorten holding time.
Tips for Buying the Right House for a Flip
The most crucial step for maximizing profit on a house flip may be finding and choosing the right house to begin with.
4. Go where the discounted properties are.
Stop scrolling through traditional real estate listings. Those are for people who want to buy livable homes at market value. Yes, some of them list foreclosures, but the pros don’t waste their time filtering them out on consumer sites and services.
Instead, focus on:
- Foreclosure listings
- Local auctions
You can even get on email lists, so you never miss an opportunity.
Additionally, experienced house flippers often market their services directly to sellers in order to get unique opportunities and early insights on good deals.
5. Get a professional inspection.
You’re trying to save money in order to maximize the end profit, of course, but this is not an area to skimp on—especially if you’re even relatively new to flipping.
Everyone who has flipped a few houses has at least one horror story about an unforeseen problem that sucked away profit margin. And each of those complications costs much more than a professional inspection would have.
6. Learn the neighborhood.
Location, location, location. Make sure the neighborhood matches the target audience you have in mind for the house. Don’t renovate a house for families, for example, unless the neighborhood is safe and set up for kids—sidewalks, neighborhood playgrounds, etc.
You can learn about neighborhoods with a little online research, by talking to a local real estate agent, and by driving through on different days of the week and at different times.
7. Make sure it’s in the right condition.
Experienced house flippers know that not every fixer-upper is right for a successful flip. Some houses need so much work, or so much complicated work, that they don’t leave room for a profit margin by the end of the project.
Look for homes that are in sound condition overall, and that can be updated fairly quickly. Avoid needs like:
- Outdated HVAC or electrical systems
- Serious roof repairs
- Foundational issues
Instead, look for projects that can benefit dramatically from cosmetic updates like fresh paint, updated flooring, and projects you know you can complete yourself.
8. Hire contractors you can trust.
Many house flippers do a lot of repairs and upgrades themselves, but everyone has to call in help sometimes. Before you make an offer on your first flip, start building a network of good contractors.
Ask for referrals, scout the internet for local professionals, and talk to a few people. Let them know what you’re doing, ask to see a portfolio, and keep them in the loop. Most contractors are happy to partner with flippers because it’s a win-win: more work for them and reliable help for you.
9. Run the numbers
Before you make an offer, run the numbers. Think about:
- The purchase of the house.
- The estimated value of necessary repairs and landscaping. (Add a few thousand extra, just to be sure.)
- Real estate fees, closing costs, and insurance.
- Utilities and maintenance for the time you own the home.
A good guideline is the 70% rule. The 70% rule says that an investor should pay the after repair value (ARV), minus the cost of the repairs. For example, if the ARV is $200,000, and you estimate repair costs at $30,000, you would use the 70% rule to calculate:
$200,000 x 70% = $140,000 – 30,000 = $110,000
So you should expect to pay about $110,000 for the house.
The 70% rule isn’t a litmus test. It’s not always possible to strictly maintain, but it’s a good general guideline.
10. Play hardball.
When it’s time to make an offer on a house, negotiate like a pro. Offer low and negotiate up, and no matter what, never pay more than what a property is worth.
That means you may have to occasionally walk away from a house you really like or an opportunity you were excited about. But do it.
11. Stay in your comfort zone.
If this is your first, or one of your first, times flipping a house, don’t go overboard—on repairs, or costs, or house size, or anything. Any project is going to seem big, and it’s going to get “bigger” as you get into it, so start small.
Look for a small, single-family in a nice neighborhood with a good flip value. The bigger the project, the greater the risk, and you have time to move up into more and more complicated projects.
Optimize Profits on Your Flip, by Fixing Wisely
Once you have a property, the real work starts. You should have at least a rough budget for repairs, but be careful: There’s a difference between cutting corners and cutting costs.
12. Know which improvements to make.
There are two considerations here: necessary repairs and upcoming trends. Neglecting vital repairs will often mean losing a sale in the end. Matching the latest trends, on the other hand, can accelerate a sale.
A professional inspection before purchase will alert you to necessary repairs. Then, do your research on the latest trends and technology for security and smart home systems, HVAC, and appliances. You don’t have to do them all, but one stand-out, modern technology piece can really make a flip shine.
13. Don’t go overboard.
Complimentary to knowing which improvements to make, however, is the wisdom to not go overboard. In addition to your budget, keep your target audience and neighborhood in mind.
Elaborate details add up, and too many unnecessary updates can quickly put the ARV out of your target buyer’s price range.
14. Call a professional when you need help.
This is the line between cutting corners and cutting costs. Some of the simple or cosmetic updates you can do, or learn how to do fairly easily: drywall, stripping wallpaper, replacing carpet, paint, etc.
But when you know you’re over your head, call upon that network of contractors. It will be cheaper in the long run to get it done right the first time than to flood the bathroom or start an electrical fire because you’re out of your depth.
15. Don’t pay for work before it’s done.
When you do call your new contractor friend, don’t be overly friendly. Sometimes deposits are necessary, but never pay the full price of a repair or update before it’s done to match the scope that was quoted.
If you plan to continue flipping houses, it is tempting to be generous and build a good relationship with a contractor. In the end, though, contractors want to work with professionals.
16. Finish on time.
Keep the budget in one hand and a schedule in the other. Maximizing profit usually means completing renovations in two to three months. Outline a plan to have it done in two months, and know that your first couple flips will probably go into three months.
The longer it takes to complete repairs, the higher your holding costs become. Every month that you own the house is another month of utilities, insurance, and maintenance that cut into your final profit margin.
Additionally, flipping the house quickly means that you’ll sell in the same market that you bought. Holding the house for too long gives the market time to change and skew your ARV.
Sell Like a Pro
Repairs and updates are done! The place looks great, and you came in just a little over the ideal budget (but within the extra funding built in for unknowns). The last step to maximizing your flip is to sell it quickly for a good profit.
17. Get a real estate agent.
Trying to sell-by-owner is where a lot of new flippers want to cut cost, but end up wishing they hadn’t. A real estate agent can help sell the house quickly and efficiently.
A real estate agent’s knowledge of comparable sales, local buyers and neighborhoods, and the market in general, are well worth their commissions. They know how to negotiate, and how to move houses.
18. Don’t neglect curb appeal.
The saying is true: You never get a second chance to make a first impression. Make sure your house is making the best first impression.
From the home’s exterior, to the landscaping—everything matters. Try driving around the block and approaching the house as if for the first time. Pull in the driveway and walk up to the front door. What do you remember in those 10 seconds? What stands out? Make sure it’s all amazing.
19. Price the house realistically.
You did a lot of work, but don’t price the house based on your emotions or your calluses. There are plenty of websites that offer insights on market value and what comparable homes in the area are selling for.
Of course, you’ll price a little bit higher because of your updates and new renovations, but don’t go overboard.
An unrealistic price will leave the house on the market for too long—increasing those holding costs still more and giving the house a bit of a black mark. Additionally, if you plan to go on flipping houses, it’s helpful to show future investors that you sold for a dollar amount near your asking price.
Other Tips for Successful House Flipping
Sometimes, unfortunately, it’s not as easy as 1-2-3, but you can still create a successful house flip if you’re prepared.
20. Make Sure There’s a Plan B
For every major step in the process, make sure there’s a Plan B. What will you do if that contractor blows it? If you discover a problem the inspector missed?
Most importantly, what will you do if the house doesn’t sell? Make sure you’re familiar with your options and what each of them involve. Do you have the option of converting it to a rental property? What would it take to offer owner financing?
21. Don’t quit your day job.
I get it: You’re ready for a change. You’ve done the due diligence. You know you can do this.
Still, don’t turn in your two week’s notice just yet. Wait until you have a few successful flips under your belt before letting go of your safety line.
It’s a lot of work to hold onto a regular job and flip a house, and you’ll forget what a weekend is for a little while. But the alternative could be a house that won’t sell and no other income. Play it safe at first.
Bonus: Get a hard money fix and flip loan.
Flipping houses requires financing and quick decisions, which is exactly what fix and flip hard money loans were designed for. Hard money loans are short-term loans with a faster approval process than many traditional loans.
Interest rates on these loans are often higher than other financing options, and a larger down payment is necessary. But while those might be drawbacks for traditional home buyers, they’re not major concerns where a house is being flipped.
Hard money loans are offered by companies and private lenders with fix and flip experience, so the lender is often more focused on the property’s potential than the flipper’s history. That means approval is easier as well faster—so you won’t miss a great opportunity while you wait for financing.
Fix and Flip Success!
There are a lot of variables to flipping houses, so take it one step at a time.
If you’re just getting started, remember the first three tips to start your house flip on the right foot: Start networking now, learn about basic repairs and what they cost in your area, and get a clear view of how much cash you have for a down payment. Then you can start shopping.