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How to Start Flipping Houses?

What is House Flipping?

House flipping involves real-estate investors buying a home, renovating it and then selling it within a short span of time, with the aim of earning a profit.

What Do You Need to Become a House Flipper?

  1. A decent credit score, which you will need in order to get loans.
  2. Enough cash to cover the down payment, closing costs and three months of interest payments
  3. Knowledge of the real estate market to locate the most promising homes and buyers.
  4. A team of experts including attorneys, contractors, home inspectors, insurance agents, real estate agents and more.
  5. Confidence and nerves of steel to deal with potential losses and delays.

What Factors Make a House Worth Investing?

  • Good Location
  • An appreciating market
  • Resale Value

How to Decide on the Location of a House for Flipping?

  • Proximity to good schools, hospitals and other amenities
  • Employment Opportunities
  • Good Neighborhood/Lower Crime Rate
  • Parks and Entertainment Centers
  • Distance From Your Location

What to See Inside the House?

Look for the following aspects to decide on your repair or renovation budget. A licensed contractor will ideally provide you with an estimate of the work that is required:

  • Structural soundness
  • Electricity/Lighting
  • Plumbing and water supply
  • Pest infestations
  • HVAC
  • Backyard or front yard landscaping
  • Conditions of doors and windows
  • Background of the house (foreclosures and listings)
  • Bathroom and kitchen renovation
  • Paint

What are the Steps to Flipping a House?

Step 1: Educate yourself about the real-estate market and financing options.
Step 2: Look for guidance from a person with experience in and knowledge of the business.
Step 3: Start locating a house, either through online research or through a real-estate agent.
Step 4: When you find a house, research about its background thoroughly.
Step 5: Make an offer, after you have taken the after repair value into consideration.
Step 6: Develop the house, do necessary renovations, put your experts to work.
Step 7: Sell the house, either yourself or through a realtor.

What are the Costs Associated with Flipping a House?

You can’t make a profit or even choose a proper house if you do not know about the costs involved in the business. There are 4 main costs associated with flipping a house.

Broad Categories

Types Of Expenses

Cost of Property Acquisition

  • Purchase Price
  • Transaction Fees
  • Title Insurance Fees
  • Transfer Taxes
  • Title Company Fees
  • Attorney Fees
  • Property Insurance Fees

Cost of Rehabilitation and Repairs

  • Cost Of Materials And Labor
  • Cost Of Cosmetic Repairs
  • Cost Of Moderate Repairs
  • Cost Of Extensive Repairs

Carrying Costs

  • Hard Money Loans
  • Mortgages
  • Home Renovation Loans
  • Utility Costs
  • Holding Costs
  • Society Fees

Cost of Marketing and Selling

  • Realtor Fees
  • Cost For Sale Signs
  • Cost Of Banners
  • Cost Of Flyers
  • Online postings And Advertisements

How to Determine Your Fix and Flip Costs?

  • After Repair Value (ARV): Estimated value of the property after renovations. This will also help you in determing an offer price.
  • Budget: Make an itemized summary of all estimated expenses.
  • Timeline: This will start from when you purchase the property and end when you sell it.

What Factors Affect the Timeline for Flipping a House?

  1. Amount of Repair Work: Some types of repair take longer than others, such as flooring, painting a house or landscaping.
  2. Size of the Property: All the repair work will take longer if the house is big.
  3. Your Schedule: It is a given that you have other priorities in life too.
  4. Contractor’s Schedule: This usually is one of the main factors, since contractors are always busy, with multiple projects at the same time.
  5. Marketing and Selling the Property: Sometimes, you can find a buyer within weeks and sometimes it could take months. Be prepared for the associated expenses in the later case.

What are the Things to Educate Yourself About Before Flipping Houses?

TOPICS

Areas to be Covered

Real-Estate Market

  • Upcoming Neighborhoods
  • Comparative Market Analyses (CMA)
  • Lenient Property Laws
  • Foreclosures and Listings

Financing Options

  • Mortgage Options
  • Interest Rates
  • Depreciation of an Asset
  • Cash Flow Estimation
  • Leverage Risk Reduction Strategies

Home Renovation

  • Green Energy Technologies
  • Negotiation Strategies with Contractors
  • Raw Material Prices
  • Home Improvements that Increase Value

What are the Best Cities in the US to Flip Houses?

Take a look at the top 10 cities of 2017 for the flipping house business, on the basis of their ROI:

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