I have been scaling a house flipping business for over a decade. When I started, I was between various media to learn all I could about real estate and flipping. Now, with many years of experience (all successes and failures), I put together this step-by-step guide for a profitable flip in 2022!
House flipping is an involved process with many steps. To break it down broadly, the steps are: Find a house, buy the house, renovate it, and sell it for profit. Again, this is a very broad ist but since the process of flipping is critical, it’s important to understand it from the beginning.
Missteps can ultimately result in an outcome that may not be profitable if you are not diligent with the process you follow.
Within your house, flipping processes are many essential steps that often require their own decisions. Each one of these steps can set up the project for success or failure all on its own.
Let’s get into my top tips and process recommendations to flip a house and make a profit this year.
Potential and Opportunity
Not every house is a good flip, and it comes down to potential and opportunity and it takes time to find homes where you get the right combination of features, including space, location, and price to offset the commitment and financial responsibility when you tackle a flip.
When searching for your flip project, focus on these three things:
- Location and housing market
- House as is and type of renovations
- How to find houses
Each component plays a significant part in finding a good house to flip. If you overlook the importance of any of these, you could find yourself with a renovated house sitting on the market without showings or offers.
The Market Conditions
Market conditions fluctuate. There’s no tried and true way to determine where the market is currently, but you can ask others who work in the market.
One of the best resources to get a handle on the market in your desired areas is local investors and realtors. Ask them about business, and what they are experiencing on their end. Most specifically, ask if they are seeing an uptick or a lul.
Some more questions to ask others in the industry include:
- What is inventory currently like?
- Which areas seem to be drawing the most attention from buyers?
- Where do you envision there to be an opportunity?
You cannot assess these questions simply from reading information on a national scale. Real estate is often more localized and can vary from neighborhood to neighborhood. Educating yourself on these nuances can narrow down the areas you would consider purchasing in. Most importantly, they can help you focus on what your offer may look like when you find a house with flip potential.
Market data information is also an essential part of the equation when it comes to buying a flip property. When you’re looking to buy property, follow a few steps to ensure it’s the right choice.
Check into the average days on the market, inventory, and pricing information (including comparable sale information), will all show you the most broad view of a variety of areas and help you to best determine not only the areas which may be best for flipping but also the price point at which homes are selling in that area.
Once you have established the location or locations, it’s time to search. There is a basic formula that many house flippers refer to when it comes to finding a house that is a good flip opportunity: You will look at 100 houses and of those, only 10 will have potential. If you are to put offers in on those 10 houses you will have 1 offer accepted. The reason for these numbers just confirms that not every house will make a good flip.
Here are a few reasons a house would not be a good flip…
- Proximity to a busy street, highway noise, unsightly homes nearby
- Neighboring buildings like commercial properties or multi-family dwellings
- Numbers that don’t leave the room for necessary improvements
Anything that a homeowner would need to overlook is a red flag. My advice is to not talk yourself into buying a house, especially when you’re getting started, where these areas bring up a red flag for you.
If it’s something that is making you think twice, the same will happen for a buyer once you’ve completed the renovations. Nothing like a pretty house that you’ve spent time and money improving isn’t generating an offer.
What to Look for in the House That Makes it a Good Flip
These recommendations are flexible. Seasoned flippers will approach finding the best home differently than a newbie. But that’s ok; the basic processes are the same.
Ideally, you would look for houses that require primarily cosmetic repairs, particularly if you are just starting. Cosmetic repairs are easier and faster to complete.
Some great examples of these repairs are:
- Changing the interior paint throughout the house. Making minor repairs and using a neutral and bright color scheme for both the walls and trim in a home creates universal buyer appeal. If you are looking for some tried and true suggestions, here are some favorites I’ve used.
- Installing new flooring. Being fortunate enough to have existing hardwood floors can mean big savings. Always check in a potential flip by looking under the carpet in the corner to see if you can spot original wood floors. If so, refinishing them is a great savings but if you need to also install carpet or tile, that can always be done too.
There are many neutral and design-friendly options to choose from and buyers will appreciate the convenience of moving into a home with fresh flooring.
- Installing new and modern light fixtures throughout the house. The selection of finishes and sizes has increased significantly during the past few years. Chandeliers, sconces, and wall lanterns can all be purchased and used to add value to any home.
- New appliances. Adding these to a kitchen adds easy and quick value. Appliances in a stainless steel finish are still at the top of buyers’ wish lists when it comes to kitchens.
- Updating plumbing fixtures throughout in a modern finish. When you are replacing faucets consider the function too. In a kitchen, many buyers prefer a spray feature or even a no-touch option, if it works within your budget. For bathrooms, even if you are working with an existing vanity, a new faucet can be a welcome upgrade.
- Exterior improvements. With cosmetic changes, think about outdoor areas that may benefit from some attention. Adding mulch, removing weeds or overgrown trees and shrubs. A fresh coat of paint on a front door, and exterior light, and even some simple power washing can save you from the more costly options.
If you are more experienced when it comes to construction and house flipping you may consider homes that would need more significant renovations. Those types of projects are more expensive and more time-consuming but they can also provide a larger profit since they can increase the value of the home more.
These types of improvements are often the ones that create the wow factor for buyers. These include:
- Kitchen renovation that includes cabinetry, countertops, and appliances.
- Bathroom renovations and the creation of additional bathrooms such as a master bathroom space.
- Opening up walls to create improved flow and living spaces throughout the house.
- Installing new windows that offer improved efficiency.
- Updating the heating and cooling systems throughout the house.
- Installing a new roof
- Finishing previously “unfinished” spaces like lower levels or upstairs attic space
Finding the House
So you’ve identified your market, you know what to look for in the house to see if there is potential, and now you need to figure out where you will look for homes to flip.
It is easy to overpay for a flip project, so you will want to remind yourself that you make money when you buy the house. That is a great way to help keep you from overpaying and thinking that you can compensate on the sale side once the project is completed.
You can search for properties in several ways, and you may even find that you use a combination of them as you search.
This is the number one place that I purchase my flip properties. It is also the most utilized platform for sellers. When people inherit houses or have a problem rental property, they often look to a local realtor to help them solve that problem, which is great for people looking to buy less than perfect properties.
Not all houses on the MLS are retail buyer ready, and the longer they sit, the better opportunity you may have to negotiate the right flip price.
Not everyone who has a house to sell wants to use a realtor. For some sellers, the idea of having showings or making repairs is not an option. That’s why these sellers can be so great to work with. Online real estate sites like Zillow and Realtor offer “For Sale by Owner” listings. And, since most people aren’t looking for these listings, they are often missed.
Buying properties online can be another option. Auction.com and Hubzu.com are two that are commonly used to list homes. Be aware that there may be time limits and additional fees when you purchase through these platforms so if you’re new to purchasing, enlist the help of someone experienced to guide you.
With the outline of how to find a house to flip it’s vital to mention the people who will help you find, fund, renovate and sell your flip for profit.
A realtor, lender, and contractor are fundamental to any successful flip. Starting with a realtor, or, preferably, an investor-friendly realtor can set you on the right path quickly so you can submit an offer quickly and confidently.
Having the right lending relationships and being prepared to use them when and if needed can keep you from having to pass on a perfect flip if the timing isn’t right.
And asking friends, family, and acquaintances for contractors will get you building the list of those you will call on when you need to get your bids together for that flip. Or even when you need to have someone walk through and provide a professional opinion.
Ready to take that next step when it comes to flipping?
Here are some resources I’ve put together to help you get the information you need to move forward on creating your flipping life.
Make sure you have the Fixer Upper Checklist, so you know which areas are critical to added value in a home.
If you are interested in learning more about the House Flip Blueprint course, go here!
There are several videos on finding houses, renovations, and funding on YouTube. Check out your favorite flipping topics and new videos weekly.