House Flipping 101: How to Start Flipping Houses

When starting a house flipping project, it’s crucial to be smart with the initial planning and budgeting stages. You should budget for every possible scenario, including what repairs will cost, what your labor costs will be, what your selling costs will be and how much you’ll need to save for holding costs if the house doesn’t sell right away.

It’s also important to figure out your After Repair Value, or ARV, which is what a home will be worth after it’s been fixed up. This simple calculation takes a property’s current value and the value of renovations, to help you determine if you’ll make a profit, break even or lose money on a deal. Ultimately, ARV helps you determine if a property is worth buying.

Before purchasing a house to flip, know the area where you’re buying. A common mistake first-time home flippers make is putting more into the purchase and renovation costs than the house will be appraised and sell for. You’ll need to know comparable prices in the area before making this investment. Be aware of all factors that will go into selling, such as market conditions, trends on how long homes in the area are on the market, and the health of nearby school systems.

Industry experts recommend buying the worst, cheapest house in the best neighborhood you can afford for a flip.

The cost of a professional inspection is minimal when compared to the potential costs of fixing serious faults of the home. Foundation problems, structural issues, outdated electrical wiring and a roof that needs to be replaced are prime examples of costly flaws you should know about before putting in an offer.

Protect yourself, and do your due diligence before making the large time and financial commitment of buying a home to flip. Especially if you’re flipping a house for the first time, you should start small with a fixer upper, as opposed to taking on a full house rehab.

When planning a timeline for your house flipping project, be practical and prepare for the unexpected. Give yourself plenty of time, and set realistic goals for project completion, with back-up plans for when you encounter hiccups. In addition, you should plan to make the major fixes first.

Prioritize big-ticket items, such as kitchen and bathroom remodels, as these typically take up more time and money to complete, but have the greatest impact on resale value. This way, if plans change or if you fall behind schedule, the most important parts of your renovation have already been completed.

Perhaps the biggest piece of advice for home flipping is to understand your skill set, knowing which jobs are DIY-friendly and which ones you can’t handle on your own. You can save money by doing small projects such as painting and tearing out carpet yourself. However, projects such as full kitchen or bathroom renovations, changing the layout of a room, electrical, plumbing or HVAC work should be done by a certified professional.

If you’re taking on the full rehab of a house, you may consider working with a general contractor to coordinate projects. Contractor and HGTV personality Mike Holmes refers to general contractors as your “quarterback” when you’re working on multiple projects that require different specialties, like in kitchen or bathroom remodels. You can also consult your contractor to see if you need any permits from the city for updates to be made. Before starting work, make sure you’re familiar with local codes and building restrictions.

It’s also helpful for first-time home flippers to work with a realtor. Real estate agents will have tons of knowledge about the neighborhoods, market conditions and comparable sales in your area. Agents can help you with negotiations, both in getting a better deal when you purchase and selling the home more quickly than you might have on your own.

Before you begin tearing out cabinets, replacing floors or installing new countertops, you should have a cleanup plan in place. When flipping houses for profit, you’re likely on a limited budget and timeline. Having a roll off dumpster in the driveway can be very useful for home renovation projects, allowing you to clean up at your own pace and saving countless trips to a landfill. You can learn more about renting a dumpster for remodeling debris, and see which size is best for your job.

When flipping a house for the first time, it can be difficult to keep your emotions and personal design vision from taking over. However, in order to be successful and make a profit while flipping houses, you’ll need to be strategic about updates you make. For example, if the other homes in the neighborhood have laminate countertops, carpeting and builder-grade cabinets, you likely won’t see an ROI on installing a marble island, new hardwood and custom cabinets.

Focus on making basic, necessary upgrades over trendy, expensive ones. Your goal is to flip the home quickly, not remodel it to your own taste.

When you’re ready to list the house, a simple staging of the home can go a long way. Buyers want to be able to see themselves living in a home before making an offer, so important home staging considerations include tidying up the yard, painting and decorating in neutral colors, deep cleaning each room and eliminating clutter.

The key to flipping a house for profit is to price the home to sell, while still leaving some room for negotiations. If priced too high, the house will sit on the market and increase your holding costs, which decreases your potential profits overall. If you’re working with a realtor, they can help you figure out an appropriate asking price, set up online listings and plan open houses.