House Flipping: The Quick Guide

House Flipping: The Quick Guide

Written by: Ismirelda Forst

House flipping is a dynamic journey through real estate, blending creativity, strategy, and profit. Nowadays, you can find many players in this market—from seasoned real estate investors to those aspiring to enter the market, from homeowners with renovation dreams to enthusiasts of real estate trends. ATTOM reports that 407,417 single-family homes and condos in the United States were flipped in 2022, up 14 percent from 357,666 in 2021.

House flipping is the art of purchasing a property, renovating it to some extent, and selling it for a profit within a relatively short time frame. It's a thrilling venture, but it comes with challenges and rewards. On average, most full-time flippers can successfully flip two to seven houses per year.

Key stages of house flipping

Real estate investment offers numerous opportunities for financial growth and personal fulfillment. Let’s review some of the key stages of flipping a house.

1. Property acquisition

First, you need to identify potential properties for flipping. Look for properties in desirable locations, preferably undervalued or distressed, and assess their potential for renovation.

Once you have found that property, you must secure funding for the purchase. This can involve bank loans, private lenders, hard money loans, or personal funds.

2. Property assessment

Before starting to flip a property, you’ll need a complete inspection to identify which repairs and renovations are required. An inspection includes assessing the property's structure, systems (electrical, plumbing, HVAC), and cosmetic aspects. The best way to do this is to hire a professional to do the job.

Once you have the property assessment, create a budget with all the costs associated with the renovation, including materials, labor, permits, and contingencies. This will keep you in line and avoid additional expenses you didn’t consider.

Photo by Sieuwert Otterloo on Unsplash

3. Renovation

Develop a renovation plan outlining the scope of work, timeline, and milestones. Consider factors like design, layout, and market trends. Ensure that renovations are done to a high standard and comply with local building codes and regulations.

It’s proven that staged houses sell faster than empty ones, and this is not an exception for flipped houses. You don’t need to spend too much effort to make it look homely - use budget options and even things you have at home to add a little extra to your flipped house.

4. Profit, negotiation, and resale

Assessing the overall profit of your project is the main objective of house flipping. You can obtain your profit by subtracting all expenses, including acquisition, renovation, holding, and selling expenses, from the selling price. According to Statista.com, in Pittsburgh, the average gross return on investment per flip was almost 117 percent. 

Here are some tips for the profit and resale stage:

  • List the renovated property through a real estate agent or online platforms.
  • Implement marketing strategies to reach potential buyers. 
  • Conduct open houses and private showings to showcase the property's features.
  • Handle negotiations with potential buyers, including price, terms, and necessary repairs or concessions.

Once you've accepted an offer, work through the closing process, which includes paperwork, inspections, and the final transfer of ownership. 

Photo by Kindel Media

Post-sale

Ensure proper financial reporting and record-keeping for tax purposes. Remember to get guidance or hire a professional accountant to ensure all your taxes are adequately reported to avoid tax evasion issues.

Reflect on the entire flipping process, consider what went right and what went wrong, keep everything in a file, and make adjustments for future projects. Discovering the potential pitfalls in each stage of house flipping and how to navigate them effectively, along with careful planning and research, are your best allies in this project. 

Home warranty

House flipping involves managing various risks, including unexpected repairs after the sale. As a house flipper, a home warranty can be a valuable asset. A home warranty is a service contract that covers the repair or replacement of major home systems and appliances. For house flippers, offering a home warranty to potential buyers can increase the property's attractiveness. It can reassure buyers that they won't be burdened with costly repairs immediately after purchasing the home, potentially making them more willing to pay the asking price. During the selling process, a home warranty can help differentiate a flipped property from others on the market, contributing to a faster sale and maximizing profit for the flipper.

Photo by immo RENOVATION on Unsplash

For those who want to enter the real estate market, house flipping can be a fun and successful project with the potential to earn money. By carefully navigating the key stages, staying informed about real estate trends, and applying sound financial practices, you can become excellent at house flipping.


Recent Blog Posts

Stay up to date on the latest real estate trends.

Worried About Home Maintenance Costs? Consider This

A buyer’s home warranty benefits both buyers and sellers, as it helps the seller close the deal while providing the future homeowner with peace of mind that they’ll be… Read more

House Flipping: The Quick Guide

House flipping is a dynamic journey through real estate, blending creativity, strategy, and profit. Nowadays, you can find many players in this market—from seasoned re… Read more

What Is Going on with Mortgage Rates?

The Fed decided to start raising the Federal Funds Rate to try to slow down the economy (and inflation) in early 2022. That rate impacts how much it costs banks to bor… Read more

The Best Way To Keep Track of Mortgage Rate Trends

Rates have been volatile and you may be wondering why? The answer is complicated because rates are affected by so many factors, including what’s happening in the broad… Read more

San Francisco Market Update - April 2024

In San Francisco, home prices haven’t been largely affected by rising mortgage rates after the initial period of price correction from May 2022 to July 2022. Since Jul… Read more

East Bay Market Update - April 2024

In the East Bay, low inventory and high demand have more than offset the downward price pressure from higher mortgage rates, and prices generally haven’t experienced l… Read more

Prepping Your Home For A Successful Sale

When you're ready to sell your home, doing a little preparation beforehand can potentially help your home sell quicker and for a higher price. 

San Francisco Market Update - March 2024

The median single-family home and condo prices rose meaningfully from December 2023 to February 2024, up 14.1% and 17.9%, respectively. Year-over-year prices also appr… Read more

East Bay Market Update - March 2024

Mortgage rates increased in February, but their strong effect on the market may be waning.

Let’s Talk

You’ve got questions and we can’t wait to answer them.