33 Pro Tips on How to Flip a House for Maximum Profit
WRITTEN BY: Benilyn Formoso
Published February 27, 2019
Benilyn has over a decade of experience as a banking officer. Her expertise is featured throughout Fit Small Business in personal finance, credit card, and real estate investing content.
Fix-and-flip real estate investing can be both risky and rewarding. It’s not as simple as buying a cheap home, renovating it, then selling it within 90 days. There’re many things to learn for you to make a successful flip. To help, we asked the experts to share their tips on how to flip a house for a maximum profit.
Here are the 33 expert house flipping tips every real estate investor should know.
1. Don’t Buy Homes With Damaged Mechanicals
Scott Brown, Co-owner & Licensed Inspector, Brightside Home Inspections
When buying a house for a flip, focus on properties that need mostly cosmetic improvements. A home that needs a new roof or has an outdated electrical system will likely require sinking too much money into the house to turn a healthy profit. Avoid homes with foundation problems unless you can fix it yourself. Focus on homes where lower cost improvements can have a big impact like a fresh coat of paint, new carpeting, refinishing hardwood floors, replacing trim and kitchen appliances.
2. Inspect the Property Before Making an Offer
Robert M. Barthelmess, Managing Partner, BGI Capital
Making an impulsive purchase or buying the property “sight unseen” puts you at serious risk so an inspection is necessary to assess the condition of the property properly and budget for repairs. This will help you create a detailed and accurate budget plan before applying for financing. This will also give you a clear understanding of how much funds you will need to ensure that the project will be completed successfully and sold for a profit.
3. Map Out Your Profit Margin Carefully
Adam P. Smith, President, Core Finance Group
You need to carefully and precisely calculate what your profit margin on any flip is going to be and weigh that against your costs, including your holding costs. Also, consider the possible brain damage like the stress and strain you are going to encounter and experience when flipping a house, and include that in your profit margin.
4. Plan for Different Potential Exit Strategies
Sarah Larbi, Real Estate Investor & Co-founder, The REITE Club
The goal of the flip is to sell it fast and make a profit. However, there are a few things out of your control when renovating that may change the outcome. If the real estate market shifted, financing rules changed, or the economy changed for the worst, then you may not be able to sell it for as much as you wanted. In addition, you may have spent more than your original budget, overestimated your sale price, or took too long to complete the project. Planning to hold and rent should you be forced to, rather than taking a loss, is sometimes a better option. To do this, you want to ensure what you buy can cash flow and still make you money. In the long term, the loss will become a gain as long as you planned for other outcomes. If the worst happens, if you have to keep the house, are you still going to make money in the longer term? If the answer is yes, then it would be a good buy.
5. Know Who Your End User is
Mike Hills, Real Estate Broker & Property Manager, Atlas Real Estate Group
Another component to successful flipping is knowing who your end user is, or who is going to buy this property from you. Along with this knowledge comes knowing their ideal price point and what they expect to pay. Are they on the lower end price point of buyers in the area or the higher end? You can tailor renovations and improvements to this price point and should only spend money in the effort of creating a product that you know someone in that market would buy.
6. Select Properties That Can Be Updated Quickly
Brenda Di Bari, Licensed Associate Real Estate Broker, Compass NYC
The number one most crucial rule you have to keep in mind when looking to flip a house is that “time is money.” You need to select a property to which you can do fast updates and sell it quickly. Many house flippers use borrowed money to buy properties when they are starting out. When you are on a borrowed dime, it is critical that you repay that loan before interest and penalties have a chance to mount. Even when the money to purchase isn’t borrowed, a quick turnaround is always good for the business.
7. Reach Out to a Reputable Hard Money Lender
Ian Atkins, Staff Writer, Fit Small Business
Once you’ve found a property you want to flip, it’s time to secure financing to buy the house and make the necessary renovations. Keeping your profit margin in mind is important, so you’ll want to do some research on providers before you take out a loan. It’s best to get in touch with a reputable lender, like RCN Capital, that’s experienced with fix and flip financing. RCN is a national hard money lender that offers competitive rates to prime borrowers and funds loans up to $2MM+. Real estate investors can apply online in minutes and receive funding in as little as 10 days.
8. Understand Risk Factors & Come Up With a Plan
Jacob Sagi, Associate Professor of Finance, The University of North Carolina at Chapel Hill
House flipping is a form of active investment. Successful real estate investors are those who understand the risk factors and know how to eliminate or mitigate them effectively. By understanding the risks involved in venturing into real estate, you will have a concrete plan on how to muster the necessary resources to deal with possible problems and handle rough times.
For more information, check out our article on how to create a house flipping business plan.
9. Know the Estimated Cost of Your Flip
John Myers, Owner & Broker, Myers & Myers Real Estate
The first step in flipping a house is to understand the numbers. One of the most important numbers is to determine how much is the estimated cost of your fix-and-flip. You may have to pay real estate commissions and certain closing costs. Calculate all possible costs involved, including property taxes, utility costs, insurance, interest ―if you borrow money to flip the house ― costs of repair, and other related expenses.
10. Build a Good Rehab Team
Ralph DiBugnara, President, Home Qualified
The right rehab team is a crucial element for first-time rehab home buyers. Buyers should contact a reputable contractor and property inspector in addition to a trusted real estate agent and mortgage lender. A reliable contractor will be able to assess exactly what the property needs and precisely what the cost for repairs will be.
11. Price Your Home Correctly
Cornelius Charles, Co-owner, Dream Home Property Solutions, LLC
To flip the house fast, you need to price your home correctly once it’s on the market. If you overprice the home in an attempt to try and get the most money, it will just sit on the market. This is especially tempting in a strong seller’s market when properties are flying off of the shelf. However, some investors suggest that you will get more money by pricing the home correctly and having a potential bidding war than you would by overpricing it. Pricing it correctly should allow you to receive offers within the first two weeks to help you sell the house as quickly as possible.
12. Know Which Improvements to Make
Ryan Burns, Co-founder, Texas Hard Money
When flipping houses, it’s important to know which improvements to make. There is a possibility that you will lose a sale due to under-improving a property and increase your cost due to over-improvement. Make sure that you are aware of the necessary renovations and repairs to make as well as the upcoming industry trends. Try to incorporate the newest technology in heating, ventilation, air conditioning (HVAC), plumbing, electrical, appliances, and other smart home improvements if you have the budget to increase the value of your house.
13. Don’t Try to Do Something Too Big
Ryan G Wright, CEO, Do Hard Money
Don’t try to do something too big, especially if you are just new to the fix and flip business. Start with a single-family home and a rehab that will cost $50,000 or less. Buying a large property with an equally huge renovation investment cost can be very risky, especially when you are just starting out. It’s better to start small while you’re still learning the ropes.
14. Don’t Make Unnecessary Improvements
Jerryll Noorden, CEO, We Buy Houses In Connecticut LLC
Be sure you only fix what is necessary. Overimproving a property won’t give you the desired return on investment (ROI) you are hoping for. Remember that this is a business and you are not renovating a house to make it look like your dream home. However, if you are fix and flipping a multimillion dollar home, for instance, it’s an exception to this rule as this kind of flips need to be impressive.
15. Partner With the Seller
Sebastian Frey, Owner & Real Estate Agent, Virtuoso Brokerages, Inc.
To flip a house for maximum profit, you can negotiate a very low price with the seller but offer to give them a reasonable piece of the pie upon resale. This strategy effectively makes the seller a silent partner in your fix-and-flip venture. The seller will be much more likely to accept a low sale price knowing that they’ll get a cut from the profits of the sale.
16. Choose the Right Market
Venkat, Owner, Basement Gurus
The no. 1 thing is being in the right market. Not choosing the right market will kill you on your very first deal. Knowing the market helps you in two ways. You do the right type of upgrades that the market is ready to pay, and more importantly, there is a high likelihood that there is a buyer waiting to buy your finished product. So do your homework and farm an area where you want to flip. Since you will have to make several trips every day, having it closer to your house is key. You should also select the price range that is ideal for flipping.
17. Determine How Much Cash You Will Need
Sophie Kaemmerle, Communications Manager, Neighborwho
When it comes to flipping houses, investors with little flipping experience looking for hard money lenders may need to obtain large amounts of cash. Generally, this amount ranges from 20% to 40% of the sale (the down payment). However, investors can lessen this amount by negotiating a deal where the lender gets a percentage of the profit. If investors have experience and good track records, hard money lenders are more likely to assist with little to no private money or down payment from the borrowing party. Nonetheless, if investors are new and low on money, they will need to ask around with the people they know, such as family and friends, with the promise of their money back and some of the profit. Another option is to find a wealthy business partner who will pay while you do the work.
18. Take Care of All the Big Ticket Items & Do the Work Correctly
Anthony West, Real Estate Agent & Rehabber, Two Lane Concepts
An unfortunate stigma with house flippers is that they tend to cut corners. Maybe guilty by association, but it can put a bad name out for those that are detailed and thorough with their work. Do yourself a favor and take care of all the big-ticket items and do the work correctly the first time. Potential buyers will appreciate it, and it’ll create a great reputation for your company moving forward on future transactions. Cutting corners can and will come back to bite you.
19. Update Bathroom Vanities
Courtney Poulos, Owner & Broker, ACME Real Estate
One of the most important improvements in a fix-and-flip project is the bathroom. When you update bathroom vanities, consider floating vanities with natural color – soft, modern, with rounded edges. White quartz counters do work in bathrooms. You can accent these with a circular mirror. When you’re choosing the colors for cabinets, consider other tones and hues than white. Natural walnut, mint, black, and charcoal are hits. Sometimes, white still works. Try to stay away from shades of gray.
20. Add a Few High-end Features to Your Property
Fallanne Jones, Real Estate Agent & Flipper, The Property Girls Team – Keller Williams Greater Rochester
Try to add a few higher-end features even to properties in lower price ranges. For example, when you’re updating the kitchen, you can add a wall mount range hood. It only costs an additional $100 to $200 but looks much more expensive. This allows you to market the house for top dollar and earn a bigger profit.
21. Buy the Worst House in the Best Neighborhood You Can Afford
Austin Alvarez, Freelance Writer & Owner, Building Our Rez
The “worst” means very poorly designed and dated cosmetic shape. Think well-worn hardwoods that can be refinished, wildly creative paint colors, disgusting carpet, unspeakable fragrances, decades-old builder grade kitchen cabinets, laminate or tile countertops, grungy sinks, and toilets. However, make sure it has a good foundation. It’s essential that all of the floor, ceiling joists, studs, rafters, and any key pieces of the home’s structural integrity are in excellent condition, especially if you’re not an experienced renovator or residential contractor. You can snag for a steal of a deal because of the house’s ugliness. You’re looking for a house that you can get for a much lower price than comparable, prettier houses in the neighborhood. List all the fixes and changes you need to do and estimate how much they will cost you. Subtract this from the estimated post-renovation value of the house. This is the number that you should not go over.
22. Update the Walls, Ceilings & Floors
Keith Reboletti, Real Estate Broker & Owner, Sweet Home Park Ridge
Once you found the house with a good foundation, you can start cleaning out and cleaning up. Walls, ceilings, and floors are what the buyers first see, and often what they focus on. So, you will want to update the painting of the property, both inside and out, remove carpeting, and refinish hardwood floors, including bathroom and kitchen floors.
23. Plan Your Renovation Carefully
Bobby Montagne, CEO, Walnut Street Finance
Planning is one of the most important stages in a fix and flip. This should include interviewing contractors and subcontractors and talking to engineers and architects if necessary. Secure your funding source. Find out the process, timeline, and costs for getting permits in the county or city where you are planning to flip. Then create a timeline and general budget, which will have to be customized depending on the property.
24. Study the Local Market
Ray Sturm, CEO & Co-founder, AlphaFlow
Having a detailed understanding of the local real estate market is key to a project’s success. For example, permitting times and requirements can be very different between markets and the requirements can change regularly, and issues with permits can delay projects quite significantly if not handled well. Also, how schools are districted and rated can vary widely, and knowing whether or not a home is in a desirable school district can impact the eventual sale price of the home. Researching the real estate market and local laws related to construction and zoning thoroughly ahead of time can help mitigate these types of problems.
25. Take the Necessary Real Estate Courses
Ciprian Morariu, Supervisor, RealEstateU
Getting the right type of education is key in flipping houses, so you should take a few courses, read books, and get familiar with the business and the jargon. There is a lot to learn to be a pro in the fix-and-flip business, such as real estate auctions, working with contractors, finding the right projects to renovate, and finding the right buyers.
26. Get a Good CRM System & Stay Organized
Seth Williams, Founder, REtipster
Get a good CRM system and learn how to use it effectively. It helps you to stay organized. Staying organized is very important in a fix and flip business because you need to be able to keep each deal on track and keep each team member on schedule. As a result, you’ll avoid a lot of unnecessary conflicts and emergencies.
Read our article about the best CRM software for small businesses for more information.
27. Focus on Paint, Hardware & Lighting
Sara Malek Barney, Owner & Principal Designer, Bandd Design
Paint, hardware, and lighting are the best projects that provide ROI for fix and flip homes. Simply updating your light fixtures and hardware throughout your house can take your flip project to the next level with minimal time and money on your part, so it’s best to focus on these items when improving the property.
28. Look for an Up-and-Coming Neighborhood
Sacha Ferrandi, Founder & CEO, Source Capital Funding, Inc
Finding an area that has a bright future but still has inexpensive prices can make successful flips. If the area has a development of new infrastructure, it most likely has a bright future. For instance, a neighborhood that’s widening streets or constructing new shopping centers is one that is growing. Make sure to pick the right neighborhood by doing proper research about an area’s future development plans.
29. Choose the Right Hard Money Lender
Peter Vekselman, Real Estate Coach & Owner, WeLend101.com
You need money to not only buy a home but also to rehab it to bring it up to sellable standards. It can be difficult to get funding for a fix and flip. Traditional lenders usually require perfect credit and often the process is long. It’s best to find a lender who works with flippers and have an easy application process, require a small portion of the down payment, and have a quick turnaround time.
30. Do Your Due Diligence When Purchasing a Distressed Property
Deborah Spence, Real Estate Agent, DeborahSpencesOldit.com
Due diligence is very important when purchasing a distressed property. Make sure the title of the property you purchase is clear and free from liens and encumbrances. If not, gauge the risk involved with buying a property without clear title and know how to work on eliminating judgments, liens, and code violations. Work with the most experienced title company in your area as they will help you navigate the process.
31. Work With a Real Estate Agent Who Knows the Local Market
Brian E. Adams, Real Estate Agent, StarPointe Realty Central Texas
Talking to a professional real estate agent in your local market is very important to ensure that you make a profitable flip. Don’t hesitate to ask your real estate agent a lot of questions about selling the property. Underestimating your area’s closing costs is a mistake you’d not want to make. If you are not planning on conceding closing costs, surveys, and repairs, it can eat a big chunk of your potential profit.
32. Leave Room for Unexpected Costs
Teris Pantazes, Co-founder, EFynch.com
No matter how meticulously you craft your budget and your expected expenses, there is a good chance that a problem might come up which will make an added cost to your project. You don’t want such unexpected things to break your project. It’s better to a sufficient buffer in the budget for contingency expenses, typically around 10% or more.
33. Join REI Clubs & Real Estate Facebook Groups
Denise Supplee, Property Management Specialist & REI Educator, SparkRental
If you are a newbie flipper, it’s best to surround yourself with experienced and expert real estate investors. Join your local real estate investing (REI) club and attend their meetings. Join as many social media groups on the subject as you can. You can post questions and read through their prior posts to learn more about flipping. You’ll learn a lot from the experience of the experts.
The Bottom Line
House flipping is not always as simple as what we see on TV. There are many risks associated with fixing and flipping houses. If you don’t know what you’re doing, you might lose your investment. However, fix-and-flipping houses can be financially rewarding if you know what to do. Use these 33 house flipping tips from the pros to help you turn a profit.