Are you inspired by HGTV montages of home renovations? Looking for a lucrative business idea and willing to put in the work to turn a profit? House flipping may be your next adventure.
House flipping is the process of purchasing a property, making improvements to increase its value, and then reselling it for a profit. This practice has gained traction as a lucrative business model in real estate, driven by rising property values and an increasing number of investors looking to enter the market. In fact, according to a recent report by ATTOM, a real estate data firm, over 79,000 homes were flipped in the second quarter of 2024—with an average profit of about $73,500 per flip.
If you’re new to the world of flipping houses, we’ve got you covered.
House flipping involves purchasing a property with the intent to renovate and resell it for profit. Typically, flippers look for homes that need cosmetic updates or major repairs, which allows them to increase the property’s market value through strategic improvements.
The goal of house flipping is to sell the property for more than the total investment, including the purchase price, renovation costs, and any associated expenses such as closing fees or taxes. To be successful, flippers must conduct thorough market research, follow a budget, and carefully plan their renovation to maximize returns.
For beginners, the most important thing to keep in mind is the balance between risk and reward. This business model is appealing to many investors and entrepreneurs due to its potential for high returns, but like any business venture, it also carries risks. Fortunately, with careful planning and informed decision-making, house flipping can be a rewarding venture that not only turns a profit but also contributes to community revitalization.
Despite fluctuations in interest rates and broader market dynamics, the house-flipping market remains resilient.
According to The National Association of Realtors, many regions are experiencing inventory shortages, creating a favorable environment for house flipping. As demand continues to outstrip supply, properties that are updated and renovated attract eager buyers—further fueling the flipping trend.
The 2024 market, with falling interest rates, fewer homes for sale, and a rising housing market, has created a unique opportunity for flippers to capitalize on the growing demand for homes that are move-in ready, especially as buyers increasingly prefer properties that have been updated.
Additionally, the rise in remote work and changing lifestyle preferences has led many homebuyers to seek opportunities in suburban or rural areas, often creating new opportunities for flippers outside traditional markets. With the right approach, flippers can tap into these trends and transform undervalued properties into sought-after homes that cater to current buyer preferences.
Overall, while the market presents its challenges, the ongoing demand for renovated homes and the favorable conditions for investment make house flipping a promising venture for those willing to take the plunge.
For many inspiring entrepreneurs, the allure of flipping houses lies in the potential for substantial profits.
However, profitability in house flipping is not guaranteed and can vary widely based on several factors—including the market, renovation costs, and buyer preferences. While there are opportunities for significant gains, it’s important to approach house flipping with a clear strategy and realistic expectations.
Fortunately, there’s good news: Recent data from ATTOM indicates the average profit for house flippers reached approximately $73,500 in the second quarter of 2024, which is an increase from $70,000 in the first quarter. Note that these profits do not include costs like instruction and are simply the difference between the purchase price and sales price.
Nevertheless, this upward trend suggests a healthy demand for renovated homes.
Profitability is influenced by various factors, such as location, property condition, and the costs associated with renovations.
Location plays a pivotal role in determining potential profits, as properties in high-demand areas tend to yield higher returns. Additionally, the condition of the property at the time of purchase can significantly impact renovation costs, Flippers who can effectively evaluate properties and anticipate necessary repairs are more likely to achieve their profit goals. Furthermore, understanding the local real estate market and buyer preferences can help flippers determine which renovations will provide the best return on investment.
By balancing these elements, house flippers can navigate the market more effectively and improve their chances of profitability.
The timeline for flipping a house can vary significantly based on the scope of renovations and individual circumstances, but it typically ranges from seven to 13 months or more. This time frame includes several key stages, each of which plays an essential role in the overall house flipping process. However, it’s important to keep in mind that the house flipping timeline is largely determined by experience.
The journey begins with identifying a suitable property to flip. The process involves researching the market, attending open houses, and possibly making competitive offers. The time it takes to find the right house can also vary based on location and market conditions.
Experienced investors can add additional value by making cash offers directly to home sellers who inherit unwanted properties.
Once a property is selected, securing financing is the next step. It may include applying for a mortgage, securing hard money loans, or using cash reserves. Additionally, the approval process can take several weeks depending on the lender and the buyer’s financial situation.
Professional house flippers have typically developed lending relationships that allow them to access capital in a few days rather than navigating the slow process involved in traditional mortgage financing. While most banking institutions require investors to invest a considerable amount of cash, professional and institutional investors minimize the amount of cash they have to invest.
The renovation phase of house flipping is often the most time-consuming part of the process. The duration depends on the extent of the work needed, from minor cosmetic updates to major structural changes. Effective project management and hiring reliable contractors can help keep this phase on track.
Since flippers add value to houses with construction, the execution of the rehab project often separates the professional flipper from the amateur investor. The competitive advantage of budgeting a project well and knowing how to best motivate contractors can create a great deal of value while helping to minimize risk.
After renovations are complete, it’s time to market the property. Selling the house involves staging the home, listing it with real estate agents, and conducting showings. The marketing and selling process will depend largely on market conditions, but having a well-prepared home can expedite the sale.
Here, professional flippers are able to create competitive advantages by following processes to determine the most accurate market value of a property as opposed to relying fully on a real estate agent.
Successful house flipping requires a clear strategy tailored to the skills, resources, and market conditions of the flipper. Each of these strategies has its own set of advantages and disadvantages.
Choose a strategy that aligns with your goals to improve your chances of success in the house-flipping market.
The most traditional house flipping strategy involves purchasing a property, renovating it, and then selling it for profit. This method allows you to directly influence the value of the home through renovations.
Flippers who choose this route should have a good understanding of home improvement processes, budgeting, and market trends. Effective project management is also vital to ensure that renovations stay on schedule and within budget.
Wholesaling is a unique approach where an investor secures a property under contract at a lower price and then sells that contract to another investor without making any renovations or taking actual title to the property at any time in the process. This strategy requires strong marketing systems, excellent negotiation skills, and a keen eye for undervalued properties.
Wholesalers often focus on building a network of cash buyers to facilitate quick transactions.
Although not strictly a flipping strategy, some investors opt to buy properties, make necessary renovations, and then rent them out for cash flow before eventually selling them for a profit. The buy-and-hold approach can provide a steady income stream while waiting for the right market conditions to sell the property at a higher price.
The BRRRR strategy stands for buy, rehab, rent, refinance, and repeat.
Investors buy undervalued properties, renovate them to increase their value, rent them out for cash flow, and then refinance to pull out equity. The BRRRR strategy can create a cycle of reinvestment, allowing flippers to grow their portfolios over time by consistently recycling their cash. This strategy requires adding value to each property and executing construction budgets.
Partnering with other investors or contractors can also be an effective strategy. By combining resources, knowledge, and expertise, you can tackle larger projects or spread the financial risk involved in flipping houses. Joint ventures can lead to shared profits and valuable networking opportunities.
Flipping houses can be a rewarding venture, but it’s important to weigh the benefits against the challenges. Here are some pros and cons to consider before entering the house flipping market.
There are many advantages that can make house flipping an appealing venture. Understanding these benefits can help you decide if flipping houses aligns with your financial and personal goals.
One of the most appealing aspects of house flipping is the potential for significant profits. Successful flips can yield substantial returns, especially in growing markets where demand for renovated homes is high. With the right property and effective renovations, investors can achieve profits that far exceed initial investments.
There is a strong demand for updated, move-in-ready homes in many regions, driven by factors such as changing buyer preferences and inventory shortages. Flippers who identify these market opportunities can capitalize on trends to attract buyers more easily.
Flipping houses allows for creative expression through design and renovation choices. Investors can personalize renovations to meet market demands and their own tastes, resulting in a more fulfilling project.
Engaging in house flipping can provide valuable skills in project management, budgeting, negotiation, and home improvement. These skills can benefit investors not only in future flips but also in other areas of real estate and personal finance.
While there are significant advantages to house flipping, there are also potential drawbacks. Recognizing these disadvantages can help you prepare for this investment strategy.
While there are significant advantages to house flipping, there are also potential drawbacks. Recognizing these disadvantages can help you prepare for this investment strategy.
House flipping carries inherent financial risks. Market downturns, fluctuating property values, poor execution, and unexpected costs can lead to losses rather than profits. It’s important for investors to conduct thorough market research and maintain a financial cushion to mitigate these risks.
The renovation phase can present various challenges, including unexpected repairs, delays in obtaining permits, and rising material costs. These issues can impact timelines and profitability, making effective planning and management essential.
Flipping a house is not a quick endeavor. The entire process—from finding a property to completing renovations and selling—can take several months. This time commitment can be daunting for those seeking quicker returns or with limited time.
Real estate markets can be unpredictable. Changes in interest rates, buyer preferences, and economic conditions can affect demand and pricing, creating uncertainty for flippers.
Navigating the challenges of house flipping can be emotionally taxing. The pressure to meet deadlines, manage budgets, and ensure successful sales can lead to stress, especially for those new to the process.
Flipping a house requires a strategic approach to transforming a property into a profitable investment. By following these steps and staying informed about market conditions, aspiring flippers can increase their chances of success in the house flipping business.
The first step is to understand the local real estate market.
Research trends, property values, and neighborhood dynamics to identify areas with high potential for appreciation. Look for neighborhoods that are on the rise or are experiencing revitalization, as these areas often attract buyers looking for move-in-ready homes.
A solid business plan is essential for guiding your house flipping venture. Outline your investment goals, budget, expected timeline, and strategies for financing and marketing. Your business plan will serve as a roadmap, helping you stay organized and focused throughout the process.
Once you have a plan in place, start searching for properties to flip. Look for undervalued homes or those in need of repairs. Use resources like Zillow, Redfin, and local real estate listings to identify potential flips.
Networking with real estate agents and attending auctions can also help you uncover hidden opportunities. The best opportunities are off-market properties, but you’ll need to either network or utilize a marketing system to reach sellers who prefer not to list their properties on the market.
Securing financing is an important step in the house flipping process. Explore different options, including personal savings, bank loans, hard money lenders, or private investors. Having your financing in place before making an offer on a property will strengthen your position and expedite the buying process.
One of the major advantages of belonging to a franchise system like New Again Houses is the access to capital from Alta Capital Management, which is not available to retail investors. The more preferable loan terms, the more projects an investor can manage at one time—which is important because it’s very difficult to create competitive advantages when only flipping one house at a time. Professional flippers create competitive advantages with volume and special access to capital that allows for that volume.
After purchasing the property, it’s time to undertake renovations.
The core business of flipping houses is adding value to the house with construction. Therefore, recruiting the right contractors and setting them up to succeed is one of the most important functions of a house flipper.
Prioritize updates that will yield the highest return on investment, such as kitchen and bathroom remodels, flooring upgrades, and curb appeal enhancements. Create a detailed renovation plan, rework your budget, and consider hiring skilled contractors to ensure quality work.
Staying on schedule and within budget is key to maximizing profits.
It’s not necessary to have construction skills—but it’s essential to have systems and processes in place to help ensure the success of contractors. Fortunately, New Again Houses Franchising surrounds franchise owners with construction support and expertise that allows them to succeed at scale.
When renovations are complete, it’s time to stage the finished house.
While house flippers usually have the ability to envision what a space can be, most buyers don’t share this gift for vision. Buying a house is an emotional experience, and an empty house doesn’t bring the same emotional experience. Staging the home can make a significant difference in attracting buyers.
Consider hiring a professional stager or using your own furnishings to create an inviting atmosphere. Your goal should be to highlight the property’s best features and create a space that allows potential buyers to envision themselves living there.
With the home staged and ready, it’s time to market and sell. List the property with a high-quality agent, who will market professionally. An agent will have a professional photographer take high-quality photos and write compelling descriptions to showcase the home’s renovations. Open houses and virtual tours can also help generate interest.
Be prepared to negotiate with buyers to achieve a profitable sale.
Once you receive an acceptable offer, work with a real estate attorney or agent to finalize the sale. Ensure all paperwork is in order and comply with local regulations. After closing, review your financials to assess the overall profitability of the flip.
Flipping houses requires a significant financial commitment, and understanding these requirements is essential for aspiring investors.
Here’s a breakdown of the costs and financing options to consider when planning a house flip.
Generally, flippers who don’t have special access to capital should anticipate needing at least 20% of the purchase price as a down payment, alongside additional funds for renovations.
For a typical first-time flipper, a budget of around $250,000 to $400,000 is reasonable to cover both the purchase and renovation costs in most markets. This budget can vary widely depending on the property’s location, condition, and the scope of renovations planned.
Without special access to capital through a franchise system like New Again Houses, flippers can expect to get financing for 75% of that total cost. That means house flippers operating on their own will need $75,000 to $100,000 per project, monthly interest payments, and holding costs totaling approximately 1% of the house’s value.
The 70% rule is a popular guideline in house flipping that helps ensure sufficient profit margins. According to this rule, you should pay no more than 70% of the after repair value (ARV) of a property, minus the estimated repair costs.
For example, if the ARV of a property is $300,000 and you estimate $50,000 in repairs, your maximum purchase price should be as follows:
Maximum Purchase Price = (ARV x 0.70) – Repair Costs
Maximum Purchase Price = (300,000 x 0.70) – 50,000
Maximum Purchase Price = 210,000 – 50,000 = 160,000
Maximum Purchase Price = $160,000
By following the 70% rule, you can better protect your investment and enhance your chances of achieving a profitable flip.
However, keep in mind that the 70% rule is primarily designed for beginners operating without support or experience. Professional house flippers will often exceed 70% to purchase less risky properties in better locations. By leveraging the competitive advantages of scale, they are still able to successfully flip higher-quality properties by exceeding the 70% rule.
While cash offers can expedite the buying process and make you more competitive in a hot market, many investors use various financing options to fund their flips. Consider these common methods.
New Again Houses franchise owners have exclusive access to funding through Alta Capital. Alta Capital has been lending money exclusively to New Again Houses owners since 2013. Alta helps minimize the cash required by financing up to 93% of the total cost while not requiring appraisal fees or interest payments during the construction project.
Hard money loans are short-term loans secured by the property itself. Hard money lenders focus more on the value of the property than on the borrower’s credit history, making them a popular choice for house flippers. However, they often come with higher interest rates and fees.
For buyers with good credit and a solid financial history, conventional mortgages can be a viable option. These loans typically require a larger down payment and involve a longer approval process but offer lower interest rates compared to hard money loans.
Private money lenders are individuals who lend based on personal relationships and agreements. Private money can come from friends, family, or acquaintances who believe in your flipping potential. Terms can be more flexible, but it’s important to establish clear agreements to avoid misunderstandings.
If you own other properties, you can leverage existing equity to finance your flip. A HELOC provides access to funds based on your home’s equity, offering flexibility and potentially lower interest rates.
Finding the right property is an important step in the house flipping process that requires a combination of research, networking, and creativity. You can significantly improve your chances of finding lucrative properties to flip by following these strategies and focusing on emerging markets.
Use online platforms like Zillow, Realtor.com, and Redfin to search for distressed properties, foreclosures, or homes listed below market value. Filter your search by criteria such as price, location, and property condition to identify potential flips. Pay attention to properties that have been on the market for an extended period, as sellers may be more willing to negotiate.
Building a strong network can open doors to off-market deals that aren’t publicly listed. Engage with local real estate agents who specialize in investment properties, attend auctions, and join real estate investment groups or meetups in your area.
Additionally, networking with other investors, contractors, and wholesalers can lead to valuable insights and opportunities.
Send targeted direct mail to homeowners who may be in distress, such as those facing foreclosure or probate situations. Craft a compelling message expressing your interest in purchasing their home as-is. Direct mail campaigns can yield leads on properties that are not officially on the market.
Consider driving through neighborhoods you’re interested in. Look for signs of distress, such as overgrown lawns, boarded-up windows, or “For Sale by Owner” signs. Note the addresses of these properties and follow up with the owners to gauge their interest in selling.
Explore online auction sites and local courthouse auctions for foreclosure properties. These properties can often be purchased at a discount, but it’s essential to conduct thorough due diligence beforehand to understand the potential costs and risks involved.
Effective budgeting and time management are critical components of a successful house flipping project. By staying organized and proactive, flippers can maximize their profits and minimize the risks associated with unexpected challenges.
Budgeting is the foundation of any successful flipping project. It not only helps control costs but also sets the stage for financial success.
Here are a few of the reasons why effective budgeting is essential to house flipping.
House flippers who have confidence in their construction numbers are better able to manage contractors and hold them accountable. Relying on a contractor’s budget often sets up projects for failure.
Staying within budget is essential for maintaining profitability. House flipping often involves unexpected repairs or complications that can lead to cost overruns. A detailed budget allows you to anticipate expenses, allocate funds wisely, and identify areas where you might need to cut costs.
A well-structured budget outlines renovation costs and incorporates other financial aspects, such as purchase price, closing costs, financing fees, and holding costs (like property taxes and insurance). By having a clear financial plan, you can make informed decisions and avoid financial pitfalls.
Establishing a budget helps set realistic expectations for your project. Understanding the costs involved allows you to assess potential profits more accurately and avoid overextending yourself financially.
Time management is equally important in the house flipping process. Properly managing your time can lead to greater efficiency and profitability. Here’s why effective time management is an essential part of a successful flip.
Time management ensures that you can list the property quickly, reducing holding costs and minimizing your exposure to market fluctuations. A well-defined timeline helps keep contractors accountable and ensures that work is completed efficiently.
In any renovation project, delays are common. Whether due to permitting issues, weather conditions, or unforeseen repairs, it’s important to build some buffer time into your schedule. By anticipating potential setbacks, you can mitigate their impact on your overall timeline.
Effective time management also involves prioritizing tasks and managing resources. Creating a detailed project timeline that outlines each phase of the renovation process allows you to allocate labor and materials efficiently, enhancing overall productivity.
To maximize your chances of success in house flipping, it’s essential to implement practical strategies for budgeting and time management. Follow these tips to stay on track.
Break down costs for each renovation task and include contingency funds for unexpected expenses (typically 10‒20% of the total budget).
Use software or apps designed for project management to keep track of tasks, deadlines, and budgets in one place.
Maintain open communication with contractors, suppliers, and any team members involved in the project. Regular check-ins can help identify issues before they escalate.
Periodically review your budget and timeline throughout the project. If you encounter unexpected costs or delays, adjust your plans accordingly to stay on track.
It’s important to understand the legal and licensing regulations and requirements in your area to ensure a smooth flipping process and protect your investment.
Licensing requirements for house flipping can vary significantly by state. While a real estate license is not mandatory for individuals who want to flip houses, having one can provide several advantages:
Yes, licensed real estate agents can and often do engage in house flipping. In fact, their expertise can give them a competitive edge in the market. By leveraging their knowledge of property values and trends, agents can identify lucrative opportunities, negotiate better deals, and manage the flipping process more efficiently.
Additionally, real estate agents can benefit from their network of industry contacts, including contractors, inspectors, and lenders.
It’s essential to familiarize yourself with local laws and regulations before starting a house flipping project. Compliance is key to avoiding costly fines or legal issues down the line.
Here are some important areas to consider—but keep in mind that this list is not exhaustive. Conduct thorough research and think about consulting with real estate agents, investors, and/or legal counsel to get the full picture of your legal responsibilities.
Check local zoning regulations to ensure that your intended renovations comply with property use requirements. Understanding zoning can also help you identify properties that have potential for redevelopment.
Most renovations require building permits to ensure that work is up to code. Failing to obtain the necessary permits can lead to fines and even require you to undo work that has been done.
Familiarize yourself with local health and safety regulations, especially when it comes to major renovations. Compliance not only protects future occupants but also enhances your property’s value.
Depending on your state, there may be legal requirements to disclose certain issues with the property (like mold, structural issues, or past damage). Ensure you understand these obligations to avoid potential lawsuits.
Flipping houses can be a rewarding business venture if approached with careful planning and execution. While some individuals flip houses as a side hustle, others choose to build a full-fledged business around it.
By establishing a legal entity, creating a solid business plan, leveraging available resources, and building a strong network, you can set yourself up for house flipping success.
One of the first steps in making house flipping a business is deciding on a legal structure. Many flippers choose to form a limited liability company (LLC) for several reasons:
Just like any other business, a successful house flipping venture requires a solid business plan. This plan should outline your goals, target market, budget, and marketing strategies. Key components of a business plan include the following:
For those new to the industry, joining a franchise or house flipping company can provide invaluable support. These organizations often offer several advantages:
Successful house flippers usually have a strong network of industry contacts. Building relationships with real estate agents, contractors, lenders, and other investors can provide essential resources and insights.
Networking can help you in many different ways:
Many people mistakenly believe that flipping houses is simply about luck, but it actually requires significant effort, knowledge, skills, and strategic planning. By being aware of these common house flipping mistakes and taking proactive steps to avoid them, you can set yourself up for a more successful and profitable house flipping experience.
One of the most common house flipping mistakes is failing to accurately estimate renovation expenses. Costs can quickly escalate due to unforeseen issues such as structural problems, outdated electrical systems, or plumbing repairs.
Always overestimate your renovation costs by 10‒20% to create a financial cushion. Obtain multiple quotes from contractors to get a realistic understanding of potential expenses and consider including a contingency fund in your budget for unexpected repairs.
Ignoring local market conditions can lead to poor investment decisions. Understanding neighborhood trends, property values, and buyer preferences is an important part of making informed choices.
Conduct thorough market research before purchasing a property. Analyze recent sales, current listings, and neighborhood dynamics. Tools like real estate market reports and neighborhood analytics can provide valuable insights.
While cosmetic updates can enhance a property’s appeal, neglecting essential structural or functional repairs can lead to issues down the line.
Prioritize renovations that address critical systems (such as roofing, plumbing, and electrical) before investing in cosmetic updates. Ensure that the property meets safety and compliance standards.
Some flippers attempt to save time or money by skipping property inspections, which can lead to costly surprises after purchase.
Always conduct a thorough inspection before finalizing a purchase. Hire a qualified inspector to identify potential issues that may not be visible during a walkthrough. This step can help you negotiate a better price or walk away from a bad deal.
Many first-time flippers believe they can handle extensive renovations themselves, only to find that the work is more complex than anticipated.
Be realistic about your skills and experience. If a project exceeds your capabilities, consider hiring professionals to handle specific tasks. Investing in skilled labor can save you time and money in the long run.
Underestimating the time required for renovations can lead to delays and increased holding costs, eating into your profits.
Create a detailed project timeline that outlines each phase of the renovation process. Build in buffer time for potential delays, and keep all stakeholders informed of progress to avoid miscommunication.
Many flippers overlook the importance of staging a home before listing it for sale. A poorly presented property can deter potential buyers and affect the selling price.
Invest time and resources into staging the home effectively. This process can involve decluttering, rearranging furniture, and adding appealing decor to create an inviting atmosphere that resonates with buyers.
Attempting to navigate the flipping process alone can limit your access to valuable resources and opportunities.
Instead, build relationships with real estate agents, contractors, lenders, and other investors. Networking can provide insights, referrals, and collaboration opportunities that enhance your flipping success.
Flipping houses can be a highly rewarding endeavor for those who are willing to invest the time and resources necessary to learn the market, understand the renovation process, and effectively manage projects. However, while the potential return can be substantial, there are risks and challenges to house flipping that you must be realistic about.
Whether house flipping is worth it for you depends on your goals, risk tolerance, and commitment level. By educating yourself, building a strong network, and developing effective strategies, you can make house flipping a rewarding and profitable venture.
Are you ready to start flipping houses? We’re here to partner with you.
At New Again Houses (NAH), we can provide you with the tools and support you need to succeed. Our unique franchise model equips franchise owners with proprietary software designed specifically for the house-flipping industry, with innovative technology that streamlines the entire process—from property acquisition to renovation management—enabling you to make informed decisions quickly and efficiently.
We also offer comprehensive training programs that cover every aspect of the house-flipping business. Whether you're a seasoned investor or just starting, our training will help you build the necessary skills and knowledge to embark on your house flipping journey. With ongoing support and a strong community of fellow franchisees, you'll have the resources to tackle challenges head-on and maximize your profitability. Take the first step toward transforming your passion for real estate into a successful business by partnering with New Again Houses. Schedule a call today to learn more.