How to Flip a House: A Step-by-Step Guide
There are many ways that a person can get involved in real estate investing today. One of the smartest—and most engaging for investors—is flipping houses. When someone flips a house, it means that they purchase a property with the intention of improving and then reselling it for a profit. To learn more about flipping houses, this basic guide can help. Learn how to understand the basics of house-flipping as a type of real estate investment, the process of flipping a house, how someone can get involved in the process of house flipping and all of the benefits of choosing house-flipping as a way to make a real estate investment.
What does it mean to flip a house?
Basically, when someone flips a house, they buy a house for sale on the market, spend some money renovating or fixing it up and then list that house for sale at a price that would make them a profit (beyond the costs of originally purchasing the house and whatever they invested into renovating it).
How a real estate investor flips a house can range from property to property. In some flips, investors will need to do near-complete renovations or rebuilds to make a property livable. In others, investors will only make cosmetic or technological changes that make the house more appealing to today's buyers, but the change to the house itself won't require much work.
Sometimes, people refer to flips that only need a minimal amount of work, which can happen very quickly, as "microflips." People who do micro-flipping usually try to turn over a high volume of homes as their strategy to profit as they buy and sell many homes.
The benefits of flipping houses as a real estate investment
Over the past several decades, flipping houses has become a popular real estate investment choice. The reason that so many people flip houses is that the process has several important benefits. These benefits include:
- They can be a safer investment: If a person is flipping in a seller's market and they ensure they do good work on a desirable home, it is more likely that their work will pay off. Many investors like safe investments because even if the returns aren't astronomical, the chance of making a profit is very high.
- They are fun or entertaining: When flipping a house, there's the chance for the investor to do a lot of hands-on work. They may be able to participate in areas of the renovation alongside contractors. They can also make a lot of aesthetic choices for the flipped home. Flipping houses isn't just a way to make money, but it's also a good outlet for time, physical energy and creative ideas.
- Flipping houses is becoming increasingly profitable: A study at the end of 2020 showed that home-flipping profits are the highest they've been in more than 20 years. So, if an investor has the means and ability to flip houses during the pandemic (or post-pandemic era), it's likely to result in a good ROI.
Flipping houses: A step-by-step guide
For anyone ready to get involved in house flipping, here is a very basic step-by-step guide to help give investors an idea of what the overall process will look like.
Set a budget
The first and most important step when flipping a home is setting, and sticking to, a budget. Flipping a house is less likely to result in a profit unless the amount that can be invested is balanced against a budget with an expected return. Once a budget is set, investors can look for a home whose sale price and estimated renovations will allow them to stay within their budget.
Find and purchase a home
Find the home that costs the right amount and needs the right amount of fixing, and make the offer. Investors should purchase a place they know they can make more beautiful and desirable and that they are confident will appeal to buyers once they're done renovating.
Plan the fixes
Once the house is purchased, make a comprehensive plan of what needs to be changed within the home to make it more desirable. Then, list these changes in the order of priority. This ensures the most important changes get made and that the budget isn't spent on less important fixes. Determine which changes an investor's team can do the work on their own or whether a contractor should be called in. Find the right contractor to do the true construction or expert-level work—it can help to work with a contractor who understands that the home is a flip and that the budget is inflexible.
Make those changes
Get started changing the home. Investors can get their hands dirty making changes and renovations, and contractors can help with heavy-duty, license required, work. Pay attention to budget and time with all things, to ensure the investment remains a smart and profitable one.
Stage and list the home
Once the home has been renovated, stage it as if a family lives there. Then find a real estate agent and list it. An agent will find the right people who are looking for a renovated space.
Accept offers and sell
Accept offers from potential buyers, then choose the buyer that is best for the project. Usually, real estate investors will want to choose the offer that brings them the most profit (but sometimes investors may be swayed by other factors, like people who feel particularly passionate about the property or work done). Sign the papers and enjoy the profit from investing in, fixing up and selling a home. (Then, consider another flip with the profit made!)
At the end of the day, flipping houses is a popular way to get into real estate investing because it is both profitable and fun. For anyone who wants to get their hands dirty and expend creative energy while also making money, house-flipping is an excellent choice. Set a budget and begin a house hunt today because buyers are looking for great properties—and investors offering flipped homes can both ensure people are getting into beautiful new spaces, and that they're investing in a venture that will bring them a worthwhile profit.