Getting Started with House Flipping

House flipping is a real estate investment strategy in which investors purchase properties in order to fix them up and sell them for a profit. Experts across the real estate world recognize house flipping as a very profitable and relatively quick investment.  

However, the profit that you get from flipping a house has everything to do with how much work you put into the entirety of the process, including the preparation phase. By downloading our house flipping checklist PDF, you’ll gain insight and guidance into best practices for the renovation process, allowing you to cover every step diligently with the returns on your investments in mind.  

Pros and Cons of Flipping a House 

If you are a first-time real estate investor, or even a veteran investor looking into flipping properties for the first time, you may be wondering if flipping houses is right for your needs. To help you make a more educated decision, let’s take a look at some of the most significant pros and cons of house flipping below.   

Pros 

1. Quick Profits

As previously mentioned, flipping properties is a relatively quick way to see a significant profit from a real estate investment. Compared to other methods, such as renting out a property, house flippers can see significant returns not long after they decide to undergo their projects. According to recent data from ATTOM, the nationwide average time to complete a flip in 2023 was 169 days, or about five and a half months. While this is up from 165 in 2022, flipping still represents a way for investors to make a median profit of around $65,000 after all expenses are accounted for.  

2. Self-Management

In addition to seeing significant returns in a relatively short period, flipping a property is something that can be entirely self-managed by an individual investor or small team (although working with a real estate agent is always advised). Not only does this mean a larger share of the profits, but it also means that everything can be done according to the scale and timeline that you deem appropriate. However, this also means that you are responsible for making responsible and proactive business decisions regarding your flip, something that our flipping a house checklist can help you with.

Cons 

1. High Barrier to Entry

Any investment option that yields this much profit is likely to have significant upfront costs associated with them, and flipping is no exception. With housing markets appreciating across the country in 2024, median home prices are rising. This means that even fixer-upper houses in any state are likely to be pricier than they have been in the past. With significant home acquisition costs, it is more important now than ever to do appropriate research and have a realistic understanding of your finances before you undergo the process.  

2. High Holding Costs

As we previously mentioned, the average time to complete a house flip in 2023 was 169 days. While this is a quick way to get what has the potential to be a significant return on investment, it also means that investors around the country must spend five months responsible for maintenance and utility costs as well as property taxes and insurance. This makes effective, cost-efficient flipping and a smooth sale essential.  

Common Mistakes to Avoid When Flipping a House 

Incorrectly Estimating Costs 

As previously mentioned, it is important to be realistic about your budget and be aware not only of how housing markets may affect acquisition costs, but also how holding onto the property during the renovation has its own associated costs. Take the time early on to do diligent research not only on the housing market but also on your own available investment funds and realistic timelines.  

Over- or Under-Renovating 

In house flipping, achieving a high return on investment is everything. This means it’s essential to focus on renovations that add value to the home. However, it is also important to do this proportionally and in moderation. Be sure to research which rehabs raise home values the most so that you don’t sink all your resources into superficial renovations unlikely to sway the home’s market value. Additionally, it’s always a good idea to focus first on getting the property up to code with local building and safety laws so that it passes final inspection with flying colors (consider also using a property inspection checklist to help you prepare for this step). 

Inadequately Preparing 

There is arguably no part of house flipping more important than the preparatory stage. If you are not careful and intentional about acquisition, you could end up investing in a property that either you cannot realistically maintain during renovations or that will take far too long and too much money to renovate in the first place. It’s important to set a maximum purchase price and stick to it so that you can achieve a healthy profit margin from your flipped investment property. This checklist will help keep you accountable in those early stages and in itself is a form of deliberate and intentional planning.  

Conclusion 

When it comes to flipping a house, it is all about execution. If done realistically and with care, house flipping can be an incredibly profitable investment, but that all depends on diligence on the part of the investor. Innago’s house flipping checklist (downloadable at the top of this page) is a great way to ensure that you are covering every base and making the process clear and accessible for yourself.