How to Flip a House
You’ve seen the reality TV version of flipping houses. But here’s how you REALLY flip a house!
You’ve seen it on TV; folks flipping houses and then getting PAID. So, you say to yourself, “Hell, if these people can flip houses and make bank, so can I!”
And you can…if you learn how to do it in the right way.
Obviously, most things on TV aren’t real. (Pointing fingers right at ya, The Bachelor.) So, when you see house flipping on TV, you think, easy-peasy. But flipping houses is a business like any other: It takes knowledge, planning, and savvy to be successful. (It also takes a great money lender like The Loan Guys.) With that in mind, let’s take a look at how to flip a house, what it all entails, and how, once you have the knowledge, you’ll be an expert house flipper in no time!
First things first, what does “house flipping” even mean? Simply put, flipping houses involves buying a property, renovating it, and selling it for a profit. House flippers take properties that most homebuyers aren’t able or willing to renovate and improve them to the point where they meet buyer demand. That’s basically it in a nutshell, but there’s a lot more that goes into flipping houses than just that. So, to make it even easier for you, here are the eight steps to successfully flipping a house for profit.
Step 1: Research your real estate market
Many real estate investors refer to neighborhoods according to a “class” ranking, from A to D. Class A neighborhoods are the wealthiest housing markets, populated by higher-income professionals. One step down are Class B neighborhoods, which are solid middle-class. Class C neighborhoods have a definite blue-collar, working-class feel. At the bottom of the ladder are Class D neighborhoods, which cater to the lowest-income earners. So, you need to ask yourself, “What markets can you afford to flip your first home in?”
Step 2: Set a house-flipping budget and plan
How much cash will you have to work with? What kind of scope are you comfortable with? How much do you have to invest? How much do you want to hold in reserve? Do you have enough to cover renovation draws until you’re reimbursed by your lender? Whatever the answers are to these questions, you still need a house-flipping budget and plan. It doesn’t have to be an elaborate Keynote presentation, filled with obnoxious corporate-speak jargon (we hate that). But it has to include a budget, a timeline, and project scope. Remember: Real estate investors are entrepreneurs – they need a business plan.
Step 3: Find a house to flip
We know, this may seem like a big, “No duh!” — but hear us out. A big part of learning how to flip houses is learning how to find good deals. That means not only buying below market value, but with wide enough margins to cover your many expenses: two rounds of closing costs, carrying costs during your renovation, Realtor fees, and of course the cost of your time and work.
That means part of finding a good deal as a home flipper is simply patience. Finding housing deals is a numbers game. As tempting as it may be to compromise, stand by your house-flipping business plan! If the numbers don’t meet your minimum, or the project scope is larger than what you’re comfortable with, keep looking. Otherwise, your costs to flip a house can change significantly, and not in a good way. (Bad…we’re talking in a bad way.)
Step 4: Find a good money lender
Before you ever make an offer, make sure you have a trusted lender (ya know, like The Loan Guys) who can fund your deal. Find someone who can work with you no matter what your needs are, and that they can explain everything about what kind of loans they can over with you in plain and simple terms. Once you find that reliable lender (ya know, like The Loan Guys), go ahead and get that fix and flip loan.
Step 5: Network with contractors
You’ll also need to start building relationships with contractors before you flip your first house. And you’ll want to start getting quotes once the property is under contract, or even before. A big part of flipping houses is building that network of contractors, general contractors, electricians, roofers, plumbers, painters, HVAC experts, the whole shebang. Unless, of course, you are doing all the work yourself. In that case…👏👏👏.
Step 6: Buy the house
Once you’ve confirmed that the property doesn’t have any (gulp!) unpleasant surprises waiting for you, walk through with several contractors. Also consider hiring a home inspector. While more experienced house flippers may look for homes that need a complete renovation, in the beginning you should stick with cosmetic repairs and updates. Make sure the property is structurally sound and that the mechanical systems are in good working order. Typically, investment property lenders move much faster than homeowner lenders, but the process still takes time.
Step 7: Renovate
Time to get to work!!
You’re on the clock from day one. Every month that goes by, you’re paying interest and other carrying costs: utilities, taxes, insurance, and any other costs of owning that particular property. That is just lost money right there! The faster you can complete the renovation project, the faster you can sell the property and pay off your loan. And the faster you get your payday while reducing the costs to flipping a house.
Yup, flipping homes successfully is definitely an exercise in efficiency.
Step 8: Sell your fix-and-flip house
The final step of flipping a house – selling it!
Make sure you hire an expert realtor in your market who knows how to sell a fix and flip house. Not all realtors are created equal, and many are part-timers, who aren’t experts in your specific market. But ultimately, you’re the one responsible for pricing properly; your profits in house flipping depend on it! So, make sure you understand the fundamentals of real estate pricing, before buying your first investment property to flip.
Yeah, this can all seem like a lot. But flipping a house is a process. Lean on other experts, from your money lender to your contractors, to your home inspector, and your realtor. When in doubt, get a second opinion, and a third…maybe even a fourth. The big thing in flipping a house, though, is to take that first step. Research and preparation will help you avoid mistakes, but it’s action that will create successful results and earn you a profit in house flipping.
Making a nice profit quickly by flipping a home is not as easy as it looks on TV, but if they can do it, so can you!