Best way to flip houses

Best Way To Flip Houses

November 16, 2021

Produced by:
Carmel Woodman

With over 8 years of expertise, Carmel brings a wealth of knowledge as the former Content Manager at a prominent online real estate platform. As a seasoned ghostwriter, she has crafted multiple in-depth Property Guides, exploring topics such as real estate acquisition and financing. Her portfolio boasts 200+ articles covering diverse real estate subjects, ranging from blockchain to market trends and investment strategies.

A quick rundown

House flipping is one of the most common choices amongst real estate investors, and for good reason. It can be a lucrative way to make money, but it isn’t as easy as it looks on the glamorous TV shows. Find out the best way to flip houses, before you begin your first or next house flipping project.

Key Topics

Flipping houses is becoming a very popular way for people to get into real estate investing. The business of flipping houses can be very profitable if it’s done right, but it’s important to do your homework before you continue down this path.

House flipping refers to the process of purchasing a house (often at an auction) and selling it again at a higher price to make a profit. Sometimes these properties need fixing or renovating, sometimes they don’t but either way it’s vital to find a property that is a good deal, to make the best profit. Which means find a property that’s selling lower than market value. 

If you’re thinking about starting a venture in house flipping, let’s go through the best way to flip houses and where you can find good house flipping deals.

What is the best way to flip houses?

Crossroads

Flipping houses is a process and it can be broken down into a few steps. If followed correctly, these steps are the best way to flip houses.

1. Understand your market

The first step towards flipping a house successfully is to understand the market that you’ll be buying a property in. Each local market is different, so figure out where people want to live and what they’re looking for. This will help you make a more informed property choice when you begin your search.

2. Get the capital you need to buy the house

Decide which financing option you’re going to go with, so that you can get your pre-approval or proof of funds letter ready. You can choose between a home equity loan if you’ve owned a home for a while or use a hard money lender or another type of lender if you need funds quickly. Understand each option inside and out, before you decide on which financing type to go with.

3. Create a business plan

Putting together a house flipping business plan is all about the timeline of the project, the scope of the renovations you need to do, and the budget. Make sure to crunch the numbers and work out how much you can afford to spend in total, how much you can spend on buying a home, your maximum spend on renovations and how much extra cash you have available for unexpected expenses.

4. Assemble a team

Flipping a house that involves renovations requires a team – from a real estate agent, to a contractor, plumber and electrician. Gathering a team of people that you can trust to tackle the house flip with you is crucial, because you simply can’t do it alone and it’s a lot easier having everyone on board from the beginning. Once you’ve created a dream team, you’ve set yourself up for flipping more houses much easier.

5. Find a good deal

Finding a good deal is one of the most important parts of house flipping. There are various ways to find a good deal which involve using a realtor, or finding distressed properties, or doing marketing campaigns and so on. You’ll need to find a property that is being sold below market value, and make sure that you can sell it at a higher price to make a good profit. Experienced flippers often use the 70% rule to determine what they can afford to pay for a house. The rule is that an investor should pay no more than 70% of the after-repair value of the house, minus the cost of the repairs.

6. Make an offer

Once you’ve found the right deal, it’s time to make an offer. On good investment deals, you may have some stiff competition, so be prepared to negotiate or out-bid your competition. Make sure you don’t offer too much for the house because you could cut into your profit margins.

7. Fix it up

Now is the time to use the capable team you have assembled to get all the repairs and renovations done. It’s important to stick to your budget and your timeline here, so that you don’t overspend. If that means choosing slightly cheaper alternatives then rather do that.

8. Generate profit by selling the property

Finally, you can sell the property. You can use a real estate agent to put the home back on the market and get it sold for the amount that you’ve worked out in your budget, in order to make the best profit. So, any offers that are at the price-point that you’re selling, or above, are worthwhile offers to entertain.

House

What is the easiest way to flip houses?

There are two ways to flip houses:

  1. An investor purchases a property that they can increase in value by making repairs and doing renovations. After they’ve fixed the house, investors make a profit from selling it for much more than they bought it for. This is also called “fix and flip”.
  2. An investor finds a neighborhood with increasing home values and purchases a property in this area. The investor simply holds the home for a few months, without doing anything to it, and then sells it again at a higher price to make a profit.

Buying a property then holding it and selling it again is certainly an easier way of flipping a house, because there’s no effort required in the meantime to do renovation projects. However, sometimes fixing and flipping can generate a higher return on investment, so make sure that you weigh up the pros and cons of each strategy before you pick one.

Where is the best place to flip houses?

Best places to flip houses

The market trends are one of the most important factors to consider when choosing an area to purchase a home to flip. Each city will have different trends and these will help you determine your ideal location. The top 5 cities to flip houses in the US at the time of writing are:

  • Pittsburgh, Pennsylvania: The city is a growing market and provides investors with great opportunities in the form of cheap houses that can produce high returns on investment.
  • New Orleans, Louisiana: The real estate market here has grown exponentially and homes are generating over 100% ROI when they’re flipped.
  • West Valley City, Utah: The city has a low remodeling cost for homes, with a high homeownership rate and a low turnover time, which makes it a great market for flipping houses.
  • Greensboro, North Carolina: There is a large increase in the demand for housing and flips cost on average $20,000 in this city, making it a worthwhile place to consider flipping houses.
  • Denver, Colorado: The rise in tech companies in this city has led to a rise in the demand for remodeled homes, which bodes well for real estate investors looking to fix and flip here.

The criteria for a good place to flip is usually a high demand for houses or remodeled houses, and the cost of flipping is low. It’s also a good idea to consider markets where the selling time for properties is shorter. Up and coming areas can be great places for the buy and hold strategy for flipping.

*This data was sourced from Fortune Builders

What is the best way to find homes to flip?

Real estate websites

Real estate websites that showcase distressed properties are a good place to start. The likes of Zillow’s Foreclosure center or Foreclosure.com can be very useful when you’re looking for a distressed property to fix and flip. If you’re just looking for a property to flip, without the repairs, the major real estate websites can still do the trick.

The MLS

The trusty MLS (Multiple Listing Service) is always a go-to for property buyers. It’s one of the easiest places to find good deals as the database is huge and you can filter your search results according to specific criteria.

FlipScout from New Silver

FlipScout is a free and easy-to-use tool that can help you find great property investment deals. The tool shows the potential ROI on each property, the estimated after-repair value (ARV), and more, so that you can make an informed real estate investing decision.

Lastly, we have also created a detailed guide on how to find cheap homes to flip, which may be very useful if you want more details on this topic.

Real estate money

How do you learn to flip houses?

If you’d like to flip houses on a full-time basis you won’t need a degree or any type of qualification but there are house flipping courses available so that you can learn the ins and outs before you start. Before you pick a course however, look for reviews online and research the course material to make sure that it’s not a scam, and that it will be beneficial to you. Here are a few courses to consider:

Fortune Builders: You can do a 2-hour introductory course for free, thereafter you can sign up to one of their more involved 3 to 4 day boot camp courses. They also offer workshops and one-on-one coaching.

Freedom Mentor: You can apply to one of their online video courses for free and after that, you can apply for an apprenticeship to complete the education for free, or you can pay for the comprehensive curriculum, as well as certification. If you choose an apprenticeship, you’ll get the course for free, plus a mentor and real estate partner.

Harvard Extension School: You can learn to buy, rehab and sell properties either online or take classes at the campus, and you’ll receive a certificate at the end. The course will take about 18 months in total and will set back around $10,000.

Udemy: This popular online educational platform offers real estate investing courses that focus specifically on buying, renovating and selling houses. These courses cost anywhere between $50 and $200, and you can access them at any time.

The bottom line

Flipping houses can be a great real estate investing strategy, but like anything, it’s important to dot your T’s and cross your I’s before you embark on this journey. So, educate yourself, crunch the numbers and do your own research on each area before you commit to house flipping.

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