The process of flipping a house involves multiple steps. You have to find the house, buy the house, renovate the house and sell the house for profit. While this breakdown is a simple version, I also know that along the way, there are missteps that can ultimately mean the difference between a profitable flip and one where you lose money. Being diligent with the process that you follow starts with how you find a house to flip. That’s why we are outlining the process so that you can stay on track and give that flip all the odds of success from the very beginning.
Not every house is a good flip. It takes time to find the houses where you get the right combination of space, opportunity, location and price to offset the commitment and financial responsibility when you tackle a flip.
When you are searching for the right flip, there are three areas that you are going to consider:
- Potential areas and market conditions
- The specific house and type of renovations
- Where to find houses at a discounted price
Each one of these components play a significant part in finding a good house to flip. If you overlook the importance of any one of these, you could find yourself with a renovated house that is sitting on the market without showings or offers.
Potential areas and market conditions: How to find the right house to flip
There is no tried and true way to determine where the market is currently at, but you can ask other people working in the market right now. One of the best resources is to ask local investors and realtors about business. They are certainly going to be able to share with you if they are seeing an uptick or a lull. What is inventory currently like? Which areas seem to be drawing the most attention from buyers? Where do they envision there to be opportunity? These are all questions that you cannot assess simply from reading information on a national scale. Real estate is often more localized and can even vary from neighborhood to neighborhood. Educating yourself on these nuances can narrow down the areas that you would even consider purchasing in and most importantly, they can begin to help you focus on what your offer may look like when you find a house with flip potential.
Market data information is also an important part of the equation when it comes to buying a flip property. Looking at 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.
The specific house and type of renovations
Once you have established the location or locations you are going to start looking at houses. 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.
Some common and easy to identify reasons a house would not be a good flip are fairly easy to spot. Characteristics like proximity to a busy street, highway noise, unsightly homes nearby and neighboring buildings like commercial properties or multi-family dwellings that a homeowner would need to overlook are areas you would want to consider. And do not talk yourself into buying a house, especially when you are 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. There’s nothing like a pretty house that you’ve spent time and money improving that isn’t generating an offer.
What to Look for in the House: What Makes a “Good Flip”
Ideally, you would look for houses that require primarily cosmetic repairs, particularly if you are just getting started. Even on homes where there is a smaller scope of renovation there is still an opportunity for profit. 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 that work in a variety of spaces.
- Installing new flooring. If you are fortunate enough to have existing hardwood floors that can mean a 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 (add link to blog post on why buyers love hardwood 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 room and at any and all price points.
- 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 the areas outdoors 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 high impact improvements are often the one that create the wow factor for buyers:
- Kitchen renovation that includes cabinetry, counter tops 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
If you want to check out the process I go through when I walk through a house this video shows you the way I’m looking at the potential of a house on every walk through. This is a video of a house from December that we did end up buying and just completed. After a first day offer, the new owners will be taking the keys in the next few weeks.
Finding the House: Where to look for deals on flip houses
So you’ve identified your market, you know what to look for in the house to see if there is potential, now you need to figure out where you are going to look for houses to flip. It’s just so easy to overpay for a flip project so you are want to remind yourself that your profit is made when you are buying the house. That is a great mental reminder to keep you from overpaying and thinking that you can make up any overage on the sale side once the project is completed.
There are several ways that you can search for properties and you may even find that you use a combination of them as you search.
The MLS (Multiple Listing Service)
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. The 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 due when you purchase through these platforms so if you’re new to purchasing, enlist the help of someone experienced to guide you.
Next steps for flipping success: Taking action on how to get started flipping
Ready to take that next step when it comes to flipping?
Here’s 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 key to added value in a home.
There are several videos available on finding houses, renovations and funding on the Threshold Homes YouTube Channel. Check out your favorite flipping topics and new videos added weekly.
Most importantly, next week I’ll be covering the details on how to buy the house and get ready to start the renovations…even when you have no experience. If you’re wondering how to get started or how to improve the outcome of your flips, this is the kind of information that can make the difference between a successful flip and a flop.
Want to buy a property and renovate it?
I have a freebie checklist that will help you — 8 Things I look for When Purchasing a Home. Just click here to download it.
Love before and afters?
Looking to buy a house to renovate? Check out the fixer upper checklist to help you find the house with the most “flip” potential.
For more inspiration follow me on Pinterest @thresholdhomesmn