People like Chip and Joanna Gaines from the show Fixer Upper have made a career out of flipping houses, and clearly it's done well for them. But not every house flipper will see Gaines-level success -- and to be quite honest, flipping houses for a living isn't for the faint of heart. It requires a lot of hands-on work and elbow grease, not to mention great people skills, a knack for negotiation, and solid knowledge of construction, design, and finance.
It is possible, though, and if you're thinking of trying to make a living flipping houses, this guide can help.
How to make a career of flipping houses
If you haven't done a house flip yet, that's your first step: Flip one property and make sure it's the right fit. Find a great deal on a home to flip in your area, negotiate the price down, come up with a rehab plan, and either DIY the work or hire contractors to complete the renovations. Finally, market and sell the property.
Once all is said and done, sit back and assess the situation. Did you enjoy it? Did you have enough time for all the work? Did you make a profit? (If not, don't worry -- you can always course-correct.)
If, after that first flip, you're still feeling good about making a career out of house flipping, then follow these steps.
1. Set your goals
If you're going to take your flipping full-time, you need to know how much work to take on to make a living you're comfortable with. So, to start, determine what "salary" you're aiming for. Then, work backward to determine how many flips it will take to achieve that in a year. According to ATTOM Data Solutions, the average gross profit on a home flip was just under $63,000 in 2019.
2. Prep your finances
Make sure you're in a strong financial position before launching your flipping business. If you'll be financing your deals, you'll need good credit, a decent amount of cash reserves, and plenty stowed away for a down payment. You will also need cash for your projected renovations (plus extra, because you never know what could happen on a flip).
3. Know your market
Understanding the local real estate market you're flipping in is incredibly important -- especially if you want to make more than just passive income. You need to know about the different neighborhoods in the area, local price trends, buyer preferences, and inventory levels, and you'll need to keep a pulse on local sales, too. This will help you determine what to offer on a potential property as well as what renovations to propose and the appropriate purchase price to set on the back end (or, if you're turning it into a rental property, what rent you might command).
4. Carve out the time
If you're looking to make serious money flipping houses, you'll need to devote a good amount of time to it. You'll also need to have several projects going at once, so make sure your schedule's prepped for that. If you're still juggling a 9-to-5 job (or even a part-time gig), you may want to make arrangements with your boss or, at the very least, set realistic expectations.
5. Hone your property-picking strategy
Knowing how to pick the right investment property is quite possibly the most important part of flipping houses. For one, you need to be able to spot a property with great resale potential. You also need to know how to accurately estimate repair costs and after-repair value so you can get a good deal and ensure returns. (Hint: Use the 70% rule here and aim to pay no more than 70% of a property's after-repair value when purchasing a flip.)
6. Perfect your team
Finding a great team is critical to your home-flipping success. You need solid and trustworthy contractors, a knowledgeable and responsive real estate agent, a reliable lender, and maybe a designer or architect to consult on occasion, too. You might not find these pros right off the bat, but work on gathering them early. If a team member you've chosen on your first flip didn't feel right, find a new one ASAP and don't waste time (or cash) on developing that relationship further.
A great way to ensure success as a real estate investor is to follow in the footsteps of someone who's done it before you. Consider getting a mentor before starting your business, or join in on a successful house flipper's projects to get your feet wet. You'll likely pick up some handy tips and tricks along the way as well as make valuable local connections that can help grow your business.
The keys to running a successful house-flipping business
You won't get everything right immediately, and it will definitely take some time to build up your business and your profits. But the best thing you can do in the early stages is to learn from your mistakes. Do a post-flip analysis of every project you take on and identify areas for improvement.
You should also talk with your team members about inefficiencies or problems they may have spotted. They could have helpful advice for improving the next go-round as well.
Beyond this, you'll want to follow these key tenets of house-flipping success:
- When in doubt, consult a pro: You don't have to DIY everything. If something's not in your wheelhouse or there's a problem you didn't anticipate, call in a proven professional. Trying to handle something you're not well versed in will only come back to bite you (and your returns).
- Don't scrimp on the marketing: Selling your flip house fast is critical to your return on investment (ROI). The longer that home sits vacant, the more you'll owe on the mortgage, utilities, and other bills, and the smaller your profit margin gets. Make sure marketing is a major part of your strategy from the get-go.
- Ease into it: If you're fairly new to flipping, don't buy a century-old property that needs a full rewiring. Start with smaller renovation projects first, then, once you have a great team and strategy in place, you can work up to more complicated flips.
- Choose your renovations carefully: Don't over-improve a property. Pick repairs that will bring the home in line with others in the neighborhood, and make sure you're on top of buyer trends and preferences. Not all renovations are created equal.
- Always leave a cushion: House flipping comes with a lot of risk, so a financial cushion is critical -- both generally and on each individual flip. You never know what extra costs will come up along the way.
Finally, be sure to avoid these all-too-common home-flipping mistakes, and commit to always learning. Read real estate investing and flipping books, follow other investors on social media, and watch the headlines for the latest market data and investing news. The more educated you are as an investor, the more poised you'll be for success over the long haul.