How to Flip Houses Successfully.

Are you planning to flip houses and have a huge success?

This blog post is all about how to flip houses successfully.

House flipping is becoming increasingly popular. In the first quarter of 2022, 114,706 single-family homes and condos were flipped, representing 9.6% of all US housing transactions. This number is impressive to me! However, I'm not shocked that house flipping is catching on. Even I, mom of two kiddos with a full-time job, managed to flip houses. 

In this type of business, you cannot predict many things, such as housing market conditions for the next six months or years ( yes, full rehab can take up to one year). You won't believe the inspiring tale of a friend of mine who turned failure into an overwhelming success! He bought a house in Philadelphia's up-and-coming neighborhood, hoping to rehab it and sell it for a profit. Unfortunately, he hit some snags and ended up pouring his heart and soul into this project for two long years. But wow, was it worth the effort! While he was working on the house, other investors built five brand new homes on the street and sold for almost a million each! Talk about perfect timing. In the end, my friend made a whopping 300k in pure profit! It shows that a little persistence and vision can take you a long way.

Flipping a house looks easy peasy - buy a heap, do some fixing, and sell for top dollars! That's what HGTV shows us, right? I fell for it too! But then, reality struck. Yet, seeing an ugly duckling turn into a stunning swan is still so much fun and satisfying. But let me share with you the honest truth - the road to the final destination is filled with struggles and challenges. Are you up for it?

Here I will share my step-by-step guide on how to flip houses successfully.

1. Educate yourself to flip houses successfully.

Flip houses can be risky, but you knew that already, right? With all those gurus offering courses that promise you'll make loads of cash without using any of your own money, it's easy to get roped in. The main priority for those gurus is selling you a course. I'm all about self-learning and finding accessible sources to learn from. Sure, some flipping courses are helpful and have loads of information. Still, all that information is free if you know where to look. So, before you start shelling out cash for a course, do your research and get your hands on as much free information as possible!

I personally started from this book: The Book on Flipping Houses.

Moreover, I've listened to BiggerPockets' YouTube Chanel to boost my mind on flipping houses.

2. Find a partner to flip houses.

The best way to start is to collaborate with someone who already flipped several houses successfully. Why? Because of connections(such as: contractors, realtors, title companies, inspectors, etc.) already established and practical skills are already adopted. 

Plus, you can even change your shoes between projects! Let's say you have some cash to invest but need experience. No worries, find someone who's successfully flipped a few houses and offer to partner up! The best part about this biz? Flexibility. You can work solo on one project while collaborating on another simultaneously! So if you've got a trusty partner with a flipping experience, don't wait—make it happen! And if partnering up isn't for you, no sweat. Use those gained skills to tackle your next project solo.

Where to find a partner to flip houses?

That's a great question! If you don't have any friends or family members experienced in flipping houses, no worries! The best way to find people interested in real estate is to attend events like real estate seminars, meet-ups, and networking events. You can introduce yourself, connect, and build relationships with experienced flippers. It's a good idea to join these events before taking paid courses. You'd be surprised how much helpful information you can learn if you're eager to learn. And remember, building relationships is vital in this business!

3. Work on Your Finances.

Before you can start flipping a house, you'll need to have the funds ready for your purchase. It's best to buy the property for cash - that way, you can avoid interest on any loans you may take out. Buying property for cash is the most secure way. If you don't have the cash to buy on your own, consider pooling your resources with friends and family. Even crowdfunding sites like FundThatFlip.com can help you get your project funded.

You should remember that traditional mortgages don't typically cover house flipping, so you'll need to find alternative ways to finance your purchase. Some options include

• Cash-out refinancing: If your primary home's value increased, then a cash-out could be an option. This means you'll remove the current mortgage's equity and refinance what you still owe.
• Home equity line of credit (HELOC):A HELOC (Home Equity Line of Credit) is a loan that utilizes the equity in your home as collateral.
• Hard money loan from a private lender, hard money loan, is a short-term loan provided by a private lender with higher interest rates. These loans vary from 6 months to 1 year and can necessitate up to 40% down payments. 

No matter which option you choose, make sure you understand the loan terms and have a clear plan to pay it back. Please do so to avoid putting your property ownership in jeopardy!

4. Study your market.

Before you invest in home-flipping projects, it's important to understand the trends and conditions of the housing market. Based on my experience, the flipping approach in downtown Philadelphia and the suburbs differs. A super modern remodel is often required to get top dollar for properties close to downtown. In contrast, Philadelphia suburbs don't require a modern style and can typically be sold with just a clean, nice remodel. As I mentioned earlier, collaboration with experienced flippers is a great idea.

Before you start flip houses, it's a good idea to research local zoning laws, building codes, and tax regulations. Talking to people with market experience can also be helpful. You might be surprised to learn how much local zoning can affect your flipping profits and overall experience. For example, different townships can have very different inspection rules and regulations. Even houses that are just 10 minutes apart can have completely different requirements! 

Here is an example from my flipping journey. Some townships in my area require a lateral inspection. Seven out of ten homes have a problem with their main drain pipe. So, township-registered plumbers charge over $600 for the inspection, and fixing underground piping issues could cost thousands or even tens of thousands. So, imagine purchasing property in one of these townships with a lateral inspection requirement 🙂

5. Hire a Real Estate Agent.

Having a real estate agent on your team can be a huge benefit. A real estate agent has an inside scoop on the current market and can advise you when buying, selling, or fixing up properties. An excellent real estate agent understands the legal jargon associated with flipping houses and can ensure all your documents are in order! Paying an experienced real estate agent for their services is worth it. Not only will they keep you informed about everything happening in the market, but they'll also provide invaluable advice. Hence, you know what to look out for when making decisions.

5. Find a property to flip.

To succeed in flipping houses, finding a property that can be renovated to increase its value and appeal to buyers is essential. To start your search, I'd suggest using an MLS property search to browse properties in your area and up to 20 miles away from desirable areas. Look at a minimum of 30-50 properties and avoid immediately selecting the first property your realtor suggests.

Look for:

Purchase Price

If you want to succeed in a house flipping business, it's essential to consider more than just the purchase price. Make sure to budget for renovation costs and any additional fees or taxes. Look for properties that are at least 30% below market value to maximize your profits. The greater the discount, the more potential for profit. Remember that buying a property at an extremely low price may not always be feasible.

Location

You may already know the importance of location in real estate, as often emphasized in advertisement slogans. Even if a house is spacious and attractive, its value could be significantly affected if it's located near a highway or industrial building, particularly with regard to resale value.

Neighbors and neighborhood

To start flip houses, it's essential to thoroughly examine the neighborhood and get to know the neighbors before buying a house. You can review the neighborhood crime report online, but spending a few weekends checking out who lives on the street is also a good idea. Avoid purchasing a house in an area where neighbors don't take care of their properties, as potential buyers will notice. Even if the house itself looks unattractive, buying in a beautiful neighborhood with well-maintained homes can still be a smart investment. In fact, fixing an ugly house could make your neighbors happy and significantly increase the value of surrounding homes. Remember that while you can fix your home, you cannot improve your neighborhood or neighbors' houses. That's why it's crucial to prioritize the area and neighborhood when searching for a home.

School district

When you are searching for a single-family house, prioritize a good school district. Even if it's your first time flipping a house and you don't do an excellent job, potential buyers may still be interested in the property because of the schools.

Rules and regulations

Before you decide to flip a condominium or townhouse, make sure to review the association rules and regulations. You might be surprised that many condo associations have restrictions such as banning dogs, children, or renters. These rules can significantly reduce the number of potential buyers interested in your property.

6.Start small.

When choosing your first project, avoiding ones requiring significant work, such as replacing underground pipes or fixing foundation issues is best. Unless, of course, you can negotiate a substantial discount on the initial purchase price that will cover the cost of fixing the primary problem and any additional concerns that may arise during the repairs.

When you start with a small flipping project this strategy offers several benefits. Firstly, calculating the remodeling cost is much easier. Secondly, you do not need a deep understanding of construction for cosmetic repairs. This may help you if your contractor has done an excellent job is more manageable. However, with a major rehab project, issues like one bathroom not having hot water when another is in use are common. These issues may not be discovered until after passing inspections and could lead to defects later on.

My first flipping project was a townhouse, which required TLC(tender loving care), and I was relieved that the house didn't need a complete renovation. I made a profit of $20,000 by flipping a house for the first time, which I considered a significant achievement.

7. Calculate the required budget.

To determine the total investment needed to flip a property, you should take into account the purchase price, renovation costs, holding costs (such as mortgage payments and utilities), marketing costs, and potential profit. The 70% Rule Formula states that you should aim to pay no more than 70% of the After Repair Value (ARV) minus repair costs, where ARV represents the estimated market value of the property after all renovations and remodeling have been completed.

Here's an example output of the 70% Rule Formula:

A flipper finds a distressed property that a seller is asking $65000 in a neighborhood with $150000 resale values. Based on your estimates, the property needs $55,000 in repairs. So,($65000+$55000)/150000=0.80*100=80%. 

In this case, your maximum offer should be at most $50000. Then,($50000+$55000)/150000=0.70*100=70%. 

Try to follow this rule with the first property and not be emotional. Otherwise, you might lose money

8. Offer and purchase.

Once you decide to move forward with the purchase, prepare the paperwork. Have your financing ready, and remember to get inspections done if needed. Many houses have potential unexpected issues that can be found during a property inspection. 

Some common issues include:

• Costly problems like mold, structural damage, etc 
• Unforeseen fees such as taxes, permits, or property liens (very common with distressed sales)
• Check flood zone
• Termites
• Incorrect zoning or easement issues.

It is essential to identify these problems as soon as possible so you can decide if the house is still a good investment. Also, Make sure that your purchase agreement spells out all responsibilities and liabilities of both buyer and seller. Remember to have an attorney review it if necessary.

If all checks out well, make an offer and hope it will be accepted by a seller. Be prepared for counteroffers and bargaining. It's OK! Negotiating is a key that will help you succeed in flipping business! 

Now you are almost there! Once sellers accept your offer, complete closing formalities according to state requirements. Ensure everything is completed correctly and documents are appropriately filed!

7. Hire a team of professionals to do the job.

Once you purchase the property, it's time to hire a team of professionals to help you with repairs and renovations. It's essential that you find reliable and knowledgeable contractors who will provide quality work at reasonable prices. You may use the professional opinion of your realtor.

Be sure to have a clear and concise contract in place with each contractor before beginning any job. It should include specific details about the scope of work, the estimated costs for labor and materials, completion dates, payment terms, and any insurance and bonding requirements. The contract should also protect both parties from potential liabilities or losses associated with the project.

In case of disagreements, keeping track of payment receipts is important. Also, remember that house flipping income is considered a short-term gain and, therefore, taxed accordingly. I delayed the sale of my property for a few extra months due to tax reasons. If I had sold it within the same year of purchase, I would have had to pay higher taxes because of short-term gain. However, if I sold the property one year after the purchase date, I would have to pay long-term gain taxes. So, I've waited several months and listed it during springtime, which is a better market for selling a house, instead of the slow late autumn season. A good accountant is critical for your business as well as strategic planning:)

8. Renovate Smartly.

It is essential to renovate smartly, that is, to balance the renovation cost with the potential resale value. Renovations should add value to the house without overspending on upgrades that won't bring a positive return on investment. You should be creative in renovating, such as repurposing furnishings or upcycling materials.

Renovations which increase the value the most: 

• updating kitchen 
• adding bathrooms
• refinishing hardwood floors
• painting walls and replacing outdated fixtures. 

Focusing on the "curb appeal" is also essential: making the house's exterior look attractive with landscaping and a fresh coat of paint.

9. Time to Sell!

Once you completed all repairs, and the house looks perfect inside and out, it's time to list your flipped home for sale! Put together a sales package that includes estimated resale value, comparable homes in the area, and details about your renovations. You can list your home on popular real estate websites or hire a professional listing agent to help you with marketing.

When you are pricing your flipped house, it is essential to be realistic. Your asking price should be based on market conditions and local trends to ensure buyers are interested while allowing you to make a profit. Once offers begin coming in, negotiate fairly with potential buyers and remain patient until the right offer comes along. 

10. Close and calculate profit!

Once an offer is accepted, it's time for closing! Finalize all documents and paperwork related to the sale so that title can transfer over to the new owners. Congratulations! You have officially sold a flipped home!

This blog post is all about how to flip houses successfully.

Conclusion:

Flipping houses is not a get-rich-quick scheme! It can be a lucrative business for those willing to work hard and take risks. I flipped houses for 7 years, and boy, it taught me that you could go from excellent to downright nightmarish in moments. I've rehabbed dozens of properties, and sometimes, I expected little but succeeded big time. Other times, I had high expectations but ultimately failed. To flip houses successfully you should have planning schedule, patience, and some luck! Be sure to consider all factors, including the property's market value after renovations, financing costs, taxes, and other fees associated with flipping houses. Most importantly -have fun! Nothing can satisfy you more  than taking a distressed property and turning it into something beautiful. Good luck!