How To Flip Houses and Make a Profit (Step-by-step Guide)

Many real estate investors start their journey by learning how to flip houses, often through trial and error.

This guide will help you avoid many common pitfalls you might encounter and give you the knowledge to start your first (or hundredth) house-flipping project with confidence.

Whether you’re new to real estate, have done your first house flipping deal, or own a portfolio of rental properties, this guide is a resource for investors at every level.

If you’re on the fence about starting your journey, here are a few reasons house flipping investors are on the rise:

1. The average gross profit for a house flip is $67,000.
2. Creative financing allows investors to buy houses with no money down.
3. Market value for a home after repair has trended upward for decades.
4. You can save money in your renovation budget by trading in “sweat equity.”

In layman’s terms: when you flip houses, you can make good money, get started with no money; after repair, your home is usually worth more money, and you can do a lot of the work yourself to save money.

So, let’s get started.

What is House Flipping?

In a nutshell, house flipping or “fix-and-flip” is the process of buying a property, adding value to the property through renovations, and then selling it for a huge profit.

It sounds simple, and it can be, but there are a few steps we can take to help secure a good deal, maximize profit margins, and avoid any risky business along the way.

How to Flip Houses for Profit

There are seven simple steps we’ll take to begin flipping houses, those are:

1. Creating a Business Plan
2. Securing Financing
3. Assembling a Team
4. Finding a House to Flip
5. Buying
6. Renovating
7. Selling

1. How to Create a House Flipping Business Plan

Before we begin any business, we need a plan – this is true for any venture, house flipping included.

This plan doesn’t have to be a complex 47-page document – it can be as simple as an Excel sheet – but it should include a few essential items:

• a market analysis
• a plan for financing
• a renovation plan
• a list of team members and their information
• the desired outcome (or exit strategy)

Market Analysis

A local real estate agent can help collect a lot of the information we’ll need by conducting a comparative market analysis (or CMA). These reports are great and have a lot of information but aren’t typically structured with investors in mind.

We’ll need to dissect the CMA for the info we want and do some manual digging to create a report that works for our needs.

There are a few key things we’ll want for our analysis:

1. the details of the house we’re looking to buy – features, dimensions, age, and proximity to local amenities (schools, etc.)
2. a short list (4-5) of comparable properties that have sold in the area in the last 12 months (these are often called comps)
3. a list of inventory (or available properties) in our market

Using this information, we’ll be able to deduce the current state of our target market, what’s selling and what’s not, and get a rough idea of how much our finished project might fetch on the market.

Plan for Financing

Before we start making offers on flip houses, we need to have a plan to purchase the property.

A good financing plan will include all associated costs of buying, renovating, and selling or owning a property.

• Down payment
• Lender and origination fees
• Monthly payments
• Property taxes
• Insurance
• Material costs
• Contractor fees
• Utility costs

Before approaching a lender or dipping into our cash reserves, we need to know (as closely as we can) how much we are willing to pay to flip a house.

Renovation Plan

How much renovation work can we afford to do, and does that work increase our profit margins at the end of the project? These two questions should guide any renovation plan.

Each house is different and will require different renovations, but some key areas to focus on are:

• Bathrooms
• Master bedrooms
• Kitchens

Sometimes our flip house will only need a new coat of paint (lucky!); other times, we’ll need to replace an HVAC system (costly!) – it’s up to us to analyze our flip house and decide how best to increase its value.

Tip: Avoid a flip house with structural damage: these repairs are time-consuming, costly, and will consume a good portion of your profit.

A Team Member List

A team list is a relatively brief list of contractors or in-house team members who’ll be involved with our house flipping project.

At best, we’ll want to have quote information, the scope of work, work schedule, and other pertinent information available.

At the least, we’ll want a simple list of who will be helping us with our project start-to-finish.

Tip: The quality of general or sub-contractors can vary wildly. It’s a good idea to have “backup” contractors listed if you run into labor issues or availability.

The Desired Outcome (Exit strategy)

We need a plan for what we’ll do with our flip house after the work has been completed and the smoke has cleared.

Are we going to turn around and list it for sale? Will we keep it as a rental property for cash flow income?

Having a clear goal in mind will influence a lot of our decisions along the way.

Now that we have a business plan put together, we can move on to the second step…

2. How to Secure Financing for Flipping Houses

It’s time to gather up our business plan and get to work financing our house flipping project; lucky for us – there are more ways than ever to finance a deal!

Some house flippers save money for a down payment, and others borrow money from hard money lenders. I personally used other people’s money (OPM) to finance most of my deals.

For this guide, I’ll list three (3) of the most common financing strategies:

• Cash
• Hard money lenders
• Private lenders

Cash

Financing flip houses from our cash reserves can eliminate many of the headaches that a third-party lender could bring to the table.

We have direct control over money flow and can make payments (to contractors or suppliers) without any oversight or delay.

The problem with paying cash is that we’re unable to leverage our cash reserves to take on multiple projects simultaneously, and we are assuming all of the risks should a house flip not go as planned.

Hard Money Lenders

Some lenders offer “hard money” loans — also known as short-term bridge loans — to real estate investors looking for fix and flip loan options.

This type of loan will often have shorter term lengths (12-18 months), have fewer limitations on property conditions, and can be approved much more quickly than a traditional loan.

Private Lenders

Private lenders in a local market could be other house flipping investors, real estate agents or brokers, family members, friends, church members, etc.

Many people are interested in real estate investing but don’t have the time or interest in doing the work themselves – these people are prime candidates for private lending.

Negotiating a loan through a private lender can be a great way to begin flipping houses with no money, but we must ensure that the loan comes from someone we trust. Also, we need to ensure we have a plan to pay back the loan promptly; a private lender won’t want to hold the note for 15-30 years as a traditional lender would.

3. How to Assemble a House Flipping Team

While we could – in theory – purchase a house before finding a team to fulfill the work, it’s preferable to start by putting together a team of professionals first.

There are three (3) people who play vital roles in our house flipping project:

• a general contractor
• a realtor
• a home inspector

How to Hire a General contractor

Ideally, we want to find what’s known as a general contractor – this is a contractor who’ll oversee the other sub-contractors (specialized roles).

A good general contractor will likely have all the necessary workers available, eliminating the need to hire multiple tradespeople ourselves.

Start the search for a contractor using sites like:

• Homeadvisor.com
• Thumbtack.com
• Craigslist.com

Or do a Google search of “general contractors near me” and skim through the results.

We can also seek out a local real estate developer or building supplier – they’ll likely know a few contractors in the area.

Once we’ve found a contractor, we’ll have them give us a quote as soon as possible, specifying the scope of work and materials involved.

We’ll collect 1-3 quotes, pick a winner, and have them collaborate on our business plan.

Hire a Realtor

We’ve likely already worked with a realtor to help put together a CMA and comps for our business plan.

However, not all realtors are alike, so we should consider if our realtor is someone we’d like to work with for a long time, possibly for dozens or even hundreds of projects.

We should find a realtor who works in the industry full-time. They’ll have better connections, be more knowledgable and be more readily available whenever we have questions or issues.

An experienced realtor can make the buying and selling process much easier for newer investors.

Hire a Home Inspector

While we don’t need to add a home inspector to our team, these professionals can teach us how to analyze a home, inside and out.

They can give insight into renovations needed or find structural damage that we might otherwise have looked over in our first walkthrough.

Anyone truly interested in house flipping or real estate investing, in general, will benefit from working alongside a skilled home inspector.

4. How to Find a House to Flip

It’s finally time to find our flip house.

Keeping a wary eye on the local MLS (multiple listing service) will allow us to be first in line should a deal pop up, but there are other ways to find properties that’d otherwise sneak under the radar.

Here are a few ways real estate investors find off-market properties:

1. Try several different marketing tactics (physical & digital media, TV, etc.)
2. Comb public records for tax delinquencies or out-of-state owners
3. Join a local wholesaler’s buyer list

Whatever way we find deals, we need to do it efficiently – speed is our friend here. We’ll do our due diligence and consult our team, but we don’t want to wait too long to start making offers, especially if the property is listed on the retail market.

Tip: You aren’t the only real estate investor in your pond – I almost guarantee it – so you need to act with some haste when making offers.

5. How to Buy a Flip House

We’ve done the research, we’ve got a plan, secured our financing, assembled a team, and found a house.

All that’s left is to work with our lender and our realtor to close on the property and get the keys.

Tip: Your realtor should take the reins here, but you’ll want to pay close attention to the ins and outs of the buying process.

6. How to Renovate a Flip House

When learning how to flip houses, we should pay special attention to how renovations on an investment property differ from renovations we’d do on our own homes.

In general, there are two things we want to really focus on:

• value-added
• work schedule

How to Add Value to a Home

Renovations for flip houses are done to increase market value and thereby make us more money after the sale, while renovations done on a place we live are often done for personal comfort or specific needs.

We want to spend our budget wisely on renovations that will make us more money, not on things we think will make the home look better.

An example of this difference would be landscaping. Landscaping can make the outdoor area around a home look and feel very nice but adds little to no monetary value when it comes time to sell the home.

On the other hand, doing a kitchen remodel is a type of renovation that can add significant value to a home.

Set a Work Schedule

During the renovation process, you should keep your general contractor on schedule, don’t let them get lazy, and turn your six-week project into a six-month nightmare.

Some issues can’t be avoided, and no project goes from start to end without the occasional hiccup, but we want to be vigilant about our work schedule.

Stop by your flip house during renovations, speak with your contractors, and observe their work to make sure the project is progressing smoothly.

Avoid making last-minute changes to your renovation plan – these things can kill a project’s momentum.

7. How to Sell Your Fix-and-Flip House

We’ve come to the best part of flipping houses: the sale.

We’ll want to list most flip houses on the retail market; that’s where we’ll access the majority of potential buyers and fetch a higher purchase price.

However, the retail market can have its setbacks: the hassle of entertaining multiple offers, doing showings, paying realtor commissions, etc.

An alternative to the retail market is to be a part of an investor network: a local group or countrywide organization of investors who buy and hold investment property.

Through an investor network, you can access cash-heavy investors who’ll snap up your flip house to add to their portfolio, allowing you to roll that momentum and profit into your next deal.

Frequently Asked Questions

Can I start flipping houses part-time?

Yes! Many investors never go full-time and continue flipping houses as a side hustle to support their 9-to-5 income.

Can you get rich off flipping houses?

Yes! I recommend branching into other types of real estate investments, but if you like it and find your rhythm, you can become very wealthy by flipping houses.

How do I find other real estate investors to help with financing?

Real estate investor groups on Facebook are a great place to start. Also, ask a few local realtors – they’ll likely have one or two local investors in their contacts list.

I’m new to real estate investing – where should I start?

Once you learn how to flip houses, you can use those skills to branch into wholesaling, buy & hold, syndication deals – you name it. As a result, flipping houses is an excellent place for new investors to start.

Wrap Up

You now have seven simple steps from spectator to participator and earn your stripes as a legitimate real estate investor.

You should now have a high-level framework on how to flip houses from start to finish, but

I recommend you continually educate yourself on the process because there are many nuances to real estate investing. As a result, every deal you make will vary.

If this article was helpful, or if there are questions you’d still like answered, feel free to leave a comment on this post, and I’ll do my best to help out!

---