Steps to Flipping a House Successfully

Prepare yourself for house flipping success with our tips for a profitable flip. When done right, house flipping can be a great way to generate an income and profit off the hot housing market. Our experts will walk you through the path to house flipping success.

1. Learn and Prepare

Being a successful real estate investor requires knowledge in many different areas of expertise. To name a few:

  • Rehabilitation construction process and costs: being able to estimate timelines and costs will help you plan your house flip and secure a loan.
  • Title transfer: knowing how properties transfer owners will help you ensure you’re making smart decisions.
  • Principles of real estate finance: knowing the basics of real estate finance can help you make the right investments.
  • Property valuation: having an idea of what a property should cost and how much you can resell it for helps you make profitable flips.
  • Real estate marketing: once you complete your rehab, you’ll need to find a buyer and knowing how to market your property will help you make a speedy sale.
  • Corporation/partnership tax law (for end of year reconciliations): house flipping is a business and being familiar with the legal aspect can help you stay ahead of any unexpected costs.

Gaining an understanding about all of the physical, legal and financial aspects of the home rehab process will always be a worthwhile use of your time. This knowledge will help to reduce unnecessary expense and increase profits.

Research is a house flipper’s best friend. Every real estate investor should do their due diligence before each transaction.

  • Analyze all of the costs: this includes purchase price, title, lender closing costs, and the cost of the actual rehabilitation.
  • Calculate the ARV: find the target property’s true ARV (after repaired value).

These steps will help to ensure that the forecasted profit goals are met.

Using Internet tools such as Zillow for property valuations, and a mortgage payment calculator is helpful. Combining sound knowledge with thorough due diligence will generally create positive results for the house flip. It is important to cover all aspects of the process. If you don’t have the knowledge yourself, then get help! A professional can be an invaluable resource, especially for a beginner house flipper.

2. Find a Team

Surround yourself with professionals. This is important for any successful investor. The amount of time and money saved by dealing with knowledgeable professionals cannot always be properly measured. Often, the professional can reduce costs and help to maintain schedules by using their own network. Working with a great team of professionals will make the entire house flip go more smoothly and efficiently. Some members to consider adding to your team are:

  • Construction contractor: a good construction contractor to consult on rehabilitation work is a necessary addition to any house flippers team.
  • Realtor: a realtor with access to REO inventory lists is a great place to start looking for homes that need rehab.
  • Attorney: an attorney or title agent can  facilitate the proper transfers of title.
  • Accountant: an accountant can handle and explain tax impacts and reconciliation, or help with pre-qualifications and credit issues.

Building a team that assists the rehabilitation and marketing process is important for both the short and long term success of all ventures. Having the proper network in place will insure the investor’s ability to handle the inevitable issues and problems that arise from the house flipping process. Educating yourself as a flipper and investor while retaining the right professionals in your network will keep you on the path to success and profits.

3. Develop a Plan

Having a business plan that defines infrastructure, budget, goals, direction and accounting is extremely important. Any partnership or corporation must stay focused on market analysis, budget, profit goals and accounting, and house flipping is no different. Proper organizational structuring will help to make the venture successful and profitable. Find partners with different backgrounds as their differing perspectives will be invaluable.

If you’re considering forming a corporation or partnership, you’ll have to go through a few steps:

  1. Develop the Corporation / Partnership Mission with the help of an attorney and/or accountant
  2. Develop a proper infrastructure and hierarchy to help follow through with your Mission
  3. Analyze market conditions to make sure your plan fits into the current market
  4. Establish detailed internal procedures to ensure deadlines, goals and profit forecasts are met.

It’s important to realize that these steps are an outline to success. Many major mortgage banks have just completed government-performed foreclosure audits. The settlements reached will stream REO Properties into the market. There will always be challenges and unforeseen issues in most ventures, but having a good plan will increase your ability to succeed in this current market. A flipper with a properly structured network that stays disciplined in their approach will generally be the most successful.

Establishing your rehab project goals from the start will help you make smarter decisions later.

4. Finding a Property for the House Flip

There are a lot of opportunities available to the investor looking for a rehab project to flip.

  • Hiring a real estate agent that specialized in REO in the area the investor is looking in
  • Joining real estate investments groups that frequently refer properties to each other
  • Aligning with a wholesaler who will feed the investor deals
  • Finding both free and pay listings of properties on the internet
  • Reviewing lists of upcoming foreclosure sales
  • Or just plain driving around neighborhoods looking for properties that may be worthwhile projects.

All of these methods will be discussed in later chapters.

Buying a House as an Investment Property

The most important thing to remember when buying a house as an investment property is that you are buying a house for profit, and not for any other reason. Whether you are buying the house to flip, or to hold as a rental property, the numbers should tell the story. Not that the house is pretty, or in a good neighborhood.

Once you have identified a property that you are interested in, determine the economics of a deal. No matter how good the property looks, make sure you can make money at it. Have your exit strategy clear in your mind, and stick to your plan. This will also be further developed in later chapters.

6. Fixing to Flip

Once you have bought the property, the next step is the rehab. Make sure your contractor is licensed and capable. Only work with someone you know personally, or  you have received excellent references for. Be present at the project, don’t leave it up to someone else to safeguard your property and your money.

Also, be careful about your choice of decor — make sure that walls, countertops, flooring, etc. are colors and styles that will appeal to the majority of buyers. Be careful not to inject your personal taste into a house that will be someone else’s home! The property needs to appeal to the buyers, not the flipper.

7. Flipping the House

Once you have bought your property and finished the rehab, what are the best steps to getting it flipped? What type of realtor should be hired, should the property be staged? How should it be priced? Every one of these questions will impact the salability of the house, the time it takes to sell and the profitability of the project. It is imperative that once finished, the project be sold as quickly as possible. Will you know what to do? The answers will be more fully discussed in the following chapters.