The ultimate guide to house flipping, according to pros who have made millions by renovating hundreds of homes

  • House flipping is a common strategy utilized by real-estate investors looking to buy, renovate, and sell a home for profit. 
  • Business Insider sought out the best expert advice real-estate investors — or aspiring ones — can use to get started flipping houses. 
  • Entrepreneurs who are serial house flippers say the key steps are identifying the right property, mapping out a careful budget, planning an appropriate renovation and orchestrating a resale for the highest price.
  • Read on for a comprehensive list of tips for flippers tackling any project, from their first to 50th.
  • Visit Business Insider's homepage for more stories.

Tarek El Moussa paid $115,000 for the first house he ever flipped, according to CNBC. He and his ex-wife, Christina Anstead, then spent $15,000 to renovate the fixer-upper in Santa Ana, California. They sold it for $169,000 for a profit of $34,000.

That makeover, in 2010, launched the popular HGTV show "Flip or Flop" — and inspired Americans to try their hand at the potentially lucrative business of house flipping. 

Put simply, the process involves the purchase, renovation, and sale of a home for profit. And in theory, the strategies for success are similarly simple — you want to buy low, fix up the property, and then sell high. But the process is far from a walk in the park.

An aspiring flipper has to identify a property worthy of the cost of a facelift, which requires weighing factors from the area it's in and the level of renovation required to the health of the local sales market and the financial risks at stake — and more. 

To help you get started, we've gathered the best advice from serial house flippers who are also expert real-estate investors.

Follow these steps to get started flipping houses. 

1. Get educated

Before flippers get started on any project, it's essential they know what they're doing and outline their plans. 

Real-estate amateurs need to take time to get educated, El Moussa told Business Insider. The veteran entrepreneur even teaches a course, HomeSchooled by Tarek El Moussa, that uses tips, templates, and personal stories to help new flippers get started. 

Once a place ticks the initial boxes on the house-flipper's checklist, it's time to do a walkthrough. 

During a first walkthrough, the first thing Day measures is the slope of the yard. 

"Water is the number thing I'm looking for. Where is the water around the house going to go when it rains?" she said.

In addition to flood risks and drainage, she also looks at the foundation to determine the home's stability. During Kansas City's dry seasons, dirt can shrivel up due to lack of moisture. A crack between the packed-earth ground and the foundation is alarming because when it rains "that water is going straight in that crack, and you're going to have water in your basement."

Water damage can be a huge expense during the flipping process. If not accounted for, it can put a damper on the expected profit.

Thankfully, there are professionals trained to spot these red flags. After the walkthrough and before the closing, Day emphasized, it's important to have inspectors examine the house. They can help point out costly hidden issues like weak sewer lines or outdated electrical wiring. 

Even if a property is a bargain, and a renovation budget is around $100,000, Day said, an unexpected expense like a broken sewer line (an incident that could have been foreseen with careful inspection) can eat up a lot of profit.

3. Budget for the project 

Even if a home passes muster with both you and the inspectors, you need to consider whether the flip will result in a large enough profit to merit buying it.

This means doing some back-of-the-envelope math, El Moussa said, and figuring out what that flip will be worth once it's fixed up. 

Identifying remodeling costs and a realistic end-game sales price are important stages of the flipping process.

Estimating the final value of the flipped property lets an investor map out how money can be allocated for a purchase and a renovation — with a cushion added in for unforeseen expenses — while still turning a profit. (El Moussa aims for a 10 to 12 percent profit per flip, according to CNBC.)

Budgeting for the renovation is another crucial step that should be completed before any commitment to buying. 

Day said her budgeting process depends on the property she plans to renovate. 

There are times when Day and her team will pick up a property where renovations have already been started by other contractors. For homes that really just need finishing touches, she'll set aside 10% to 15% of the budget for unforeseen costs. But for the projects where she needs to go down to the studs, take out walls and do more groundwork, Day sets aside 30% of her budget for surprise expenses. 

Day also stressed the importance of taking the costs of labor and time into account when budgeting. 

Because of the coronavirus pandemic, she continued, many Americans are upgrading or otherwise doing construction work on their homes, which means it could take weeks to get contractors or construction workers on the site.

That would mean weeks of paying the carrying costs on the property without making progress towards a sale. So if additional time isn't incorporated into the budget, flippers can find themselves stuck holding the property while waiting to complete crucial next steps — all while paying an extra mortgage and utilities.

4. Renovate the property

Property renovation has a direct impact on a flip's profitability. Returns are often tied to the amount of money a flipper puts into a property to upgrade it, and the time it takes to complete renovations.

The scariest thing about flipping a house is that the longer a project takes, the less money you make, El Moussa told Business Insider. 

"You have to move fast and be organized," added El Moussa, emphasizing that a good goal is to complete a flip start to finish in about five months.

To achieve that, work with a reliable, experienced contractor. According to El Moussa — who just launched his own firm, TEM Investments — the contractor is the most important person in a project. And to find a good one, a flipper should get referrals and ask to see examples of a contractor's previous work, plus their license. 

When it comes to design, make sure the property fits in with its neighborhood. Follow the trends of the area, El Moussa said, and look to to nearby homes for remodeling inspiration. 

Though it's unlikely flippers can do all the work themselves, HGTV expert Scott McGillivray said that when it comes to home renovation, an owner's "sweat equity" can make a big difference. Carrying out some of the renovation work yourself can cut costs and maximize profits. 

For example, the "Income Property" host suggested, "You can lay some flooring." That's just one of several DIY projects homeowners can tackle to make the most of their space. 

Trends of the moment are also something to keep in mind when renovating a property. 

Because of the coronavirus pandemic, Day said, people are staying at home more, so they crave offices and home gyms. 

"People are moving because they don't have a work space in their home, and they have to have one," she said. 

5. Resell the property

A big part of turning a profit on a flip is the market the property is in.

In short, some locations are more profitable than others. 

House flipping saw a popularity surge through the mid-2000s and 2010s when cheap property values and a surge of reality TV shows made flipping mainstream.

But the income-generating pastime has a higher bar in 2020, partly thanks to skyrocketing property prices across the country. In the first quarter of 2020, flipping returns saw a nine-year low, despite the house flipping rate hitting a 14-year high, per a report from ATTOM Data Solutions. That means it's especially important to pick the right place and time to undertake a flip.

WalletHub's recent ranking of flipping markets evaluated cities across the country in terms of market potential, renovation costs, and quality of life. The top spots for flips were Sioux Falls, South Dakota; Missoula, Montana; Rapid City, South Dakota; Billings, Montana; and Peoria, Arizona. (Note that WalletHub's estimations were made pre-pandemic and check for the most recent data available in the area you're eyeing for a flip.)

These cities were seen as attractive because of relatively low costs of renovation compared to the quality of life and market potential. The upshot: Save on renovations, and ensure a high likelihood of being able to sell in a timely fashion for a good price.

But the calculus of flipping is just one part of the resale process. 

Form great relationships with realtors who are experts in the neighborhoods and sub-neighborhoods, Day advised. This beneficial when looking for a property to buy, she explained, but it is just as critical when you are ready to sell. 

The agents can bring their clients to see the renovated home first, Day said. Networking with brokers over a longer period of time helps, too; it allows you to update them the next time you have a new project in the area.

"A lot of times projects are sold before we ever put them on the market — because of those relationships," Day said.

Not all first-time house flippers are so lucky. But if you take all this advice, you'll have solid ground to start from.

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