35 Pro Tips on How to Flip a House for Maximum Profit
Despite what HGTV has you believe, flipping houses is more hustle than glamor. Investing in fix-and-flip real estate can be incredibly rewarding but it’s not without risks. Before you get a fix-and-flip loan , do your due diligence. If you take the right steps, house flipping can be quite lucrative, too. In the first quarter of 2019, house flippers saw an average ROI of 38.7 percent, according to ATTOM Data Solutions. It can be tempting to dive headfirst into the world of house flipping, but it’s critical you arm yourself with invaluable advice from experienced real estate investors. To help, Seek Business Capital spoke with house flipping connoisseurs and real estate professionals to share their best pro tips for flipping houses with maximum profits. These experts have learned a thing or two about the industry in their time so take their advice and apply it to your next fix-and-flip project. Here are 35 house flipping tips from pros you should know:
1. Buffer Your Budget
“When flipping houses it is important to be conservative with your rehab budget, especially when you are a beginner investor,” said Ryan Substad, owner of Northwest Property Solutions, who sold a flipped property earlier this year and has two more in the works. “Always leave a little buffer in your budget for unexpected things that might come up. When you start opening up walls or doing demo to the property, there are bound to be extra things that need to be fixed as well as the little things you originally forgot to put in your budget. Also, the thing many people forget to set some money aside for are the items that come up on the buyer's inspection report that they want fixed before closing. If you make sure you have some buffer room in your budget and are conservative with your numbers, you'll be well on your way to making a nice profit.”
2. Never, Ever Overpay
“Paying too much for a fix and flip property is one of the most damaging mistakes that real estate investors can make,” said Kuba Fietkiewicz, fix and flip investor and founder of REIkit , house-flipping software. “If you get your value right, then you can get a whole lot of other things wrong and still make money. However, the reverse is rarely true. If you get the value wrong, it doesn't matter what you do, you're likely going to lose money. Although doing due diligence on a property is not as fun as swinging a hammer, analyzing the numbers for each deal carefully is a crucial first step that should not be rushed. This starts with calculating an accurate ‘after repair value,’ or the price you could sell the house for after you are done fixing it up. The difference between the deal price and the ARV must be large enough to cover expenses and also make a profit. Once you find a property worth pursuing, you can confidently put in an offer and start making your house flipping dreams a reality.” Seek on Forbes: Can You Flip a House With Credit Cards?
3. Ditch Zillow
“If you live in a competitive area in a hot market, you can pretty much forget about finding an amazing flip deal on the [multiple listing service] or on MLS-tethered sites such as Zillow or Redfin,” said Logan Allec, CPA and owner of Money Done Right . “Believe me, if a good deal were to be found on Zillow or Redfin, somebody else would likely have already purchased it. This may not be true in all markets, but in most competitive markets, you won't find great flip deals where everybody else is looking. So if you can't pull up Redfin to find your first flip, how exactly do you find a deal? Well, you have to get creative. Some people use wholesalers (people who are experts in finding real estate deals for cash buyers) and others use the internet. But how did I find my first flip deal that netted me over $20,000 as a rookie? I used good old direct mail marketing. That's right. I sent out letters and postcards to absentee landlords in my target market. Yes, this took an initial investment of about $1,500. Yes, it was a risk. But it paid off. The reality is that amazing flip deals — especially in most real estate markets around the country in this particular moment in time — won't fall into your lap. You are going to have to put in either time or money (probably both) to find your first flip deal.”
4. Market to Sellers to Find the Best Properties
“We have been flipping in New York since 2013, and what you don't see on HGTV is the struggle to buy properties cheap enough to renovate and sell at a profit,” said Michael Pinter, principal of LMPK Properties. “The number one tip I would give to beginners is that you need to start and continue marketing to motivated sellers to find properties to flip. We use direct mail to targeted lists of people that might want to sell, Pay Per Click (PPC) Google AdWords advertising and a variety of other methods to find the properties that we flip. On TV, you see the easy part, which is what happens after you buy the house.”
5. Stay Objective
“It is important to look at any deal objectively before you get too excited about a new deal,” said Jamell Givens, a real estate investor with Globalized Realty Group, who has completed more than 150 flips in the last seven years. “When evaluating a deal, you need to be sure to look at both the best and worst case scenarios so you don't purchase properties with too much downside risk. Even after having done 150+ flips, projects often run into unexpected costs — over budget construction expenses, unexpected structural issues, longer times on [the] market, etc., so it is very important to make sure you are still profitable in a scenario where things don't go as smoothly as planned.” See: 4 Signs It’s Time to Get a Business Line of Credit
6. Choose the Right Neighborhood
"When searching for a house to flip, buy an old house in a highly respected or up-and-coming neighborhood,” said Tonya Bruin, CEO of To Do-Done , a handyman service company that specializes in home renovations and fixer-uppers. “You can figure out the lay of the market by talking to a real estate professional or completing your own research. The homes in these neighborhoods will already price above typical selling value, so when you completely renovate them with new appliances and structural repairs, they will sell for even more." Learn: How to Flip Houses With No Money
7. Move Quickly and Always Measure
“Don't spend too much time getting quotes,” said Uriah Dortch, professional home buyer and broker with The Inspiring Investment , which completes about 22 flips a year. “This seems like a big no-no, but previously I would spend weeks trying to [get] the infamous three quotes and it would end up stopping the job. With house flipping, the longer the hold the more money it costs you in interest payments for the loan. So the quicker you get it done, the more money you make. Learn how much things cost on a square foot basis [such as] labor and materials. That way you can estimate costs no matter the house. Measure the house! I've had so many houses that were 100 to 200 sq. ft. bigger than Zillow and tax records showed. This equals huge profits if you are selling at $100+ per foot.”
8. Price Down, Negotiate Up
“My best tip for maximum profits on a flip house might sound a little crazy but it works,” said Kris Lippi, real estate broker and owner of ISoldMyHouse.com . “When your project is complete and you put it up for sale, consider pricing your house slightly lower than market value. Everyone loves a nice new flip house and buyers know the real estate market well, so when they see a new flip hit the market priced with what looks like a great deal, their emotions will take over and create a sense of urgency. I guarantee this tactic will get you multiple offers that you can negotiate with and end up selling your house for more money and faster than if you priced it high to begin with.”
9. Find Properties Via Wholesalers
“When you are purchasing a house to flip, don't only rely on realtors to find properties to purchase,” said Shawn Breyer of Breyer Home Buyers . “Another option to find deals is to sign up to be on a wholesaler's email list. A wholesaler is someone who sends out marketing to find properties that need repairs at discounts. These properties will be anywhere from 40 percent to 60 percent of the ‘after repair value’ (ARV). To find wholesalers, search for 'We Buy Houses [your city]' and you'll find websites of these companies. You can reach out to them by calling or filling out the 'Contact Us' forms on their sites and ask to be added to their cash buyer list. You will them be notified when they find discounted houses.” Read: Cities With the Most Female Entrepreneurs
10. Be Realistic With Your Renovations
“Before successfully flipping your property, it's important to asses the price of the home and the way that price can be increased,” said Bryan Stoddard, who runs Homewares Insider , a publication that covers home topics. “When assessing the realistic price, it's especially important not to overblow the final price, even with renovations in sight. On the other hand, when you've assessed the state of the property and decided to renovate, the option of increasing price comes naturally. When doing these kinds of renovations, it's important to cover the basics: getting a new coat of paint, refreshing the flooring or installing better windows. If that's not necessary, it's worth investing your money in trends. There's a wide offering of new and trendy technology you can use. Make sure to stay realistic, though. If your goal is to flip the house as fast as you can, don't bother with huge renovations and potential money drains. For inexperienced house-flippers, I'd recommend to start small and build up from there.”
11. Seek Undesirable Houses
“When buying, look for houses that have a solid foundation and structure, but have ‘undesirable’ features: ugly paint, old windows, unkept lawns,” said Luke Babich, a licensed realtor, real estate investor and CSO of Clever , a company that pairs home buyers and sellers with real estate agents. “These details are easy to fix but can lower the price. Avoid properties with major problems such as a leaky roof or plumbing systems in need of repair. Inspect the house in-person to avoid finding bad surprises, and consider bringing an agent or experienced tradesman with you to identify possible areas of concern.”
12. Know Your Prices
“Overpaying for contractors/work as well as material is another one that can quickly turn a flip to a flop, so make sure you know your prices for materials as well as what a job costs both on the total project budget perspective as well as on an individual trade-by-trade basis,” said Lukasz Kukwa, real estate advisor with Coldwell Banker Residential Brokerage. “Make sure you do not over develop or renovate for the area in which you are selling as well as the buyer pool you will be selling to, many times beginner investors invest funds into the wrong places such as on higher-end materials or products that will not yield them a return as their buyer pool in that price point will not pay more for those choices and/or the comps in the area you are renovating in won't cover the extra money you put out for these items and work.”
13. Get on Local Auction Email Lists
“Get on the newsletter email list of your local city governments auction list. A lot of landholding governmental agencies like Caltrans in California hold monthly auctions for homes on their land,” said James Taylor, realtor and owner at Vegas Property Hotline . “If you are not on that list, you are missing out on great fixer upper deals where you can make a pretty penny. Start by calling up your city hall clerk and asking them which department is in charge of auctioning homes on public land.” Read This: 10 Tips for Female Entrepreneurs From Women Who Founded Their Own Companies
14. Have an Exit Strategy
“Always have at least two exit strategies and don’t dawdle choosing which one to execute,” said Robert Taylor, of The Real Estate Solutions Guy, who has rehabbed houses for nearly 15 years. “If you buy a house and find yourself significantly in over your head, resell it and move on quickly — even if it means selling at a loss. Every experienced investor has had to do this. Holding on to a bad deal just costs you more money. The longer you hold on to a skunk, the more you’re going to smell like him. We’ve bought houses that after I purchased them, I realized that the numbers were just too thin. We turned around and resold the property as-is for more than we would have made if we had spent the money to fix it up and flip it.”
15. Be Better Than the Competition — And Don’t Forget Uncle Sam
“Do better work [than] the competition but focus more on paying for better quality work and things that will make the finished product better. You don't have to overspend but understand design, trends and to put the two together to make your product look superior,” said Kukwa. “Finally, budget for closing costs such as realty transfer tax and all associated closing costs that come with selling a home as well as for taxes after the project is complete; although he may not be on the LLC, Uncle Sam is always a partner.”
16. Partner Up With Contractors
“Partner up with a contractor to save money on renovations and maximize your profit,” said David Richardson, real estate investor with Property Managemently . “As a house flipper, you'll probably be doing a lot of business with contractors to do renovations. By selecting a specific contractor you can provide them long term steady business that can lead to them lowering their prices for you. This is especially beneficial when buying undesired houses that need some fixing up. Remember that it costs a lot of money to buy a house and can sometimes cost even more to repair it.”
17. Focus on Returns
"It’s important not to get too emotionally attached to your renovations. It’s all a numbers game, so go by the numbers,” said Brad Davidson, CEO of Norton Home Solutions . “Take note of what renovations in your area brings back the highest returns. This often comes from rehabbing specific parts of the house, like the kitchen and the bathrooms. Kitchens and bathrooms will typically help in raising your sales price the most. But it’s also important not to go overboard. To avoid overspending in these areas, check photos of other recently sold comps in the area. If all of the kitchens you see are fetching top dollar with granite countertops, it makes no sense for you to install quartz countertops in your flip."
18. Buy Yourself Time
“When you make offers or LOIs (letter of intent), make the offer contingent on ‘business’ days,” said Spike Spencer , an experienced house flipper and real estate investor. “For example, in an LOI, offer to go to contract in seven ‘business’ days, as opposed to seven days. If timed correctly, [if you] sign on Friday [it] can give you two weekends, or four days, extra to plan, research [and] raise funds.”
19. Pay Attention to Curb Appeal
“ I tend to buy homes that need significant repairs where the rehabs can take a few months. Curb appeal can make or break a flip sales price, so I have learned to be conscious of the lawn from day one,” said Rae Dolan, of AMI House Buyers . “Dumpsters don’t go on the grass, and my regular tradesmen know to work in the garage or driveway, and not in the yard. I had a few signs made saying, “Do not work on the grass” that I stick in the front and back yards of my flips for any workers on site that may not know that as being a standard rule when working on my properties. Lawns can take a month or two to bounce back, but many investors treat it as an afterthought to deal with once renovations are complete. We typically clear the yard and give any needed treatments (like sod or weed control) at the start of the project whenever possible, so by the time we’re done, the lawn has completed ‘renovation’ as well.”
20. Use Other People's Money — Lots of It
“Why use your own money when you can borrow it? My house flipping business started with pitching investors like on that TV show Shark Tank (and getting lots of rejections),” said Cynthia Cuccuini, real estate investor and CEO of Hey Rich Girl . “ Now 10 years later, I wake up everyday living the dream. If traditional financing is not an option, then get creative. Use seller financing or partner with someone else with a lot of money that is looking for a return on their investment. Get a small business loan or secure a private loan from friends and family. Make sure that you have a solid business plan to show your investors your portfolio of work and vision of the company.” Related: How to Write a Great Business Plan
21. Finishing Is Half the Battle
“You've heard that 80% of your results come from 20% of your efforts,” said realtor John Castle . “When it comes to flipping houses, that 80% comes from the last 20% of your work. A project that is 80% done won't sell for more than 20% of what you paid for it. You have to go all the way with it or you'll lose money. Flipping houses is like doing a backflip. If you stop the flip halfway, you're just going to hurt yourself. You either commit to finishing or you don't start.”
22. Avoid Private Mortgage Insurance With a Sizable Down Payment
“A big mistake many first-time flippers make is going in and trying to buy a house without a solid down payment,” said Connie Heintz, president of DIYoffer . “... If you do not have enough down payment, you might end up paying private mortgage insurance and the costs can add up quickly. So my advice would be to secure enough cash at hand if you want to make any reasonable profits flipping houses.”
23. Look for Pre-Foreclosures
"Pre-foreclosures are great for house flippers and investors as they represent a unique opportunity to purchase properties at a discounted price,” said Andrew Weinberger, CEO of PropertyClub . “ You can get a great deal, just like with a foreclosed home, but with a pre-foreclosure, you have a few key benefits. A pre-foreclosure simply means the owner is behind on mortgage payments, these homes are generally still owner-occupied, meaning they're typically in better shape and require less work and fewer repairs before being market-ready. Additionally, it's much easier to secure financing on a home in pre-foreclosure compared to buying a foreclosure at auction. This means that you have all the upside of buying a foreclosed home without having to invest as much of your own capital."
24. Line Up Buyers Before You Buy
“Get a good buyers list going,” said Don Wede, president of Heartland Funding Inc . “Find out exactly what the buyer is expecting [such as] location, are they bank qualified and for how much, level of luxury in the renovations, square footage, beds and baths. If you have enough buyers lined up for the particular type of home you may even drive up the price with a bidding war. When you have buyers lined up for your projects you can close quickly when done with the project, and move on to the next deal.”
25. Consider Venture Partnerships
“Joint venture partnerships allow you to close on deals faster, save on fees and most importantly, use your leverage,”said Carlos Rodrigues of Magellan Wealth Management . “Banks require higher down payments, whereas private joint ventures secure non-bank lending vehicles.”
26. Flipping Houses Is a Team Sport
“Build a team of trusted professionals. House flipping is a team sport, believe or not,” said Suzanna Lam, CEO of Innochamp Advisors . “From CPA, real estate lawyer, realtor, mortgage broker, hard money lender, wholesaler, birddogs, contractors, painter, plumber, electrician, handyman, decorator, videographer etc ... Don't even think about flipping houses as a business if you don't have this set up. Bring them to lunch and treat them nice. Even if you don't need them, bring them to lunch. Dig your hole before you're thirsty.”
27. Focus on Structure
“Take care of the structural items such as the furnace, hot water heater and electrical,” said Ricardo Mello, co-founder and managing partner of Manhattan Miami Real Estate . “These are foundational components of any home. If they are old and in need of upgrading, then it's worth it to invest in replacing them. Buyers can easily update cosmetic aspects such as the flooring, countertops, and the paint color of walls. But structural items are more challenging and costly to fix. A new furnace and hot water heater, for example, can turn a house into a buyer magnet and allow you to significantly increase the sale price.”
28. Get to Know the Neighborhood
“Before getting started in a new neighborhood take some time to check out open houses or virtual tours of newly renovated houses that have been listed for sale. Keep notes regarding the features you see, both common and unique,” said Melanie Hartmann, owner of Creo Home Buyers . “Monitor the number of days on market and price activity. This information will help determine quality of finishes to use, potential layouts and what price to list the property for a quick sale. The goal being that you are able to make your rehabs just as nice or better than the local ‘competition’ and list at a slightly lower price for a quick sale that often ends up being over-asking due to multiple bids.”
29. Get Creative With Deal Structures
“When you make an offer, try to create a win-win scenario for all parties involved. This does not always mean making a straight cash offer, sometimes, you need to get creative with how you structure a deal,” said Jamell Givens, who has flipped more than 150 houses as a real estate investor at Leave The Key Homebuyers . “For example, if the seller is not in immediate need of the proceeds from the sale, maybe they'd prefer to owner finance the property while you flip it and earn interest on their money at a much higher rate than they'd see if it was sitting in the bank — a win for them, and you've just locked in low-cost financing and can buy the property with little cash down. Always try to look at a deal from all angles and you'll find you'll be able to buy properties you traditionally would have passed on.”
30. Prehab and Sell to Other Investors
“An investment strategy we've used to maximize profit is to ‘prehab’ a property and sell to another investor,” said Ashley Hutton, manager and realtor at Recrafted Real Estate . “Every investor will have a different definition of ‘prehab’ but ours would be purchasing a hoarder house or a home with foundation damage, for example. These are two criteria we can get properties at very good discounts. We'll clean out the property and bring the home down to the studs, and get the foundation fixed to pass inspection. Then we'll sell the property to another investor or contractor who now has the opportunity to let their imagination run wild to create something beautiful. This is a great strategy especially when trying to manage multiple flips and a really great lead comes your way but [your team is too] busy to do a full renovation.”
31. Assume Things Will Go Wrong
“Many unexpected things can go wrong when you buy a house to fix and flip,” said Omer Reiner, realtor and president of FL Cash Home Buyers . “Repairs can end up being much higher than expected due to improper due diligence or lack of experience, the after repair value of the house (ARV) may change until you sell it or you may have had it wrong from the beginning, the house can take much longer to sell vs. what you expected, squatters breaking in and the list goes on. One thing that really helped us stay out of trouble and be profitable on our flips is being very picky about which houses we buy, over estimating repairs and time to sell and underestimating the sales price to make sure that we are not overly optimistic about our potential profit.”
32. Don't Overthink It
“I have done numerous property flips, and from my experience one of the biggest ways to maximize profits is to not think too much about the flip,” said Christopher Popkin , Real Estate Developer. “I know that may sound crazy! Don't get me wrong, being in the real estate industry requires most of your time and attention, but becoming too analytical and picky can ultimately drag out your pockets and time. The number one key to a successful flip is getting it back on the market as soon as possible. When you start over-thinking and adding unnecessary steps, you begin [to] hold on to the property for too long, and that cuts into your profit. Do what needs to be done! That two-bedroom apartment doesn't need coffered ceilings. Fix it up, and get out.”
33. Passing Inspection Doesn’t Mean Everything Is Perfect
“I always advise my clients to conduct a thorough inspection if possible and to properly splurge on a credible inspection company that will ensure there are no major or obvious issues with the house or property,” said Angat Saini, Principal Lawyer and Founder at Accord Law . “That being said, even if the proper inspection is completed, it is important to have a substantial contingency fund for unexpected expenses that may arise after the teardown process begins. More than often, things like asbestos can be found behind the house's drywall, which is often undetectable by an inspector. Fixing this can result in having to spend thousands of dollars on top of the renovation budget.
34. Get a Real Estate Agent License
“This can hold many benefits. You will save yourself a bundle on commissions, typically 3% from the listing agent side,” said Robert Bogino, owner of Bogino Properties . “That is a big chunk of change. You can also hold your own open houses and get an unrepresented buyer to save the buyers agent 3%. Open houses also give you real-time feedback on your flip from buyers. This will also let you go view properties whenever you want and not have to schedule showings with a realtor. Being the first out to a property and making the first offer can make all the difference. I also convert any leads for flips into retail listings for myself.”
35. Add Special Features For Your Future Homeowner
“Flipping houses is a business, but it’s also about creating a beautiful home for someone,” said Matt Bigach, CEO of Nexus Homebuyers . “If your budget allows it, create a few special features that homeowners may only expect from higher end properties. This could be a small coffee bar, built-in cubbies, a vaulted ceiling in the living room or any other small design feature that can help your home stand out. When a potential buyer walks into your property, they should be able to see themselves living there, and a few special design features can potentially help your flip sell quickly and even receive multiple offers.”
The Bottom Line
Flipping houses has its challenges, from getting a fix and flip loan to finding the right property. But if you can make it from start to finish, the process can be incredibly rewarding — both personally and financially. That said, it’s important to remember that you don’t need to reinvent the wheel. Just because you’re flipping your first house doesn’t mean it hasn’t been done before, so use the resources available to you to learn from other peoples’ mistakes. Read books, check out blogs, talk to experienced flippers — no matter how you get your information, researching the topic can save you a headache and potentially even thousands of dollars. More From Seek
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