House Flipping is one of most popular real estate investing strategies for the past few years, more or less thanks to HGTV’s good amount of reality shows on flipping properties. Regardless of the influence on HGTV, we at DoorInvestor also believe it is not only a popular way to get started in real estate investing, but also a good starter way to get into this game.

What is House Flipping?

You are in the house flipping business when your real estate investment plan involves buying a property, with the intention to own it for a very short amount of time, conduct an amount of rehab on it to “force” its value to go up, and then turn around to list it for sale, pocketing the difference as your profit.

What is NOT House Flipping?

Just to be clear, if you deploy a strategy like BRRRR (you can read about BRRRR here), you then by definition is not house flipping. In true house flipping, you would be selling the house for profit. If you plan to keep the house as a rental and profit by rent income, that is BRRRR and not house flipping.

What properties are good for house flipping?

When you are trying to make a profit by selling a property at a higher price then you really want to start off on the right foot, and this means you should try to acquire your target property at the lowest cost possible. So where can you find properties at a discounted price? Perhaps a property in a distress state, or the absentee owners, or from short-sale or foreclosure (there are sites that auction them online nowadays, like auction.com), or through probate, or your friends and relatives need a quick sale of a property for another project… The possibility is endless, so it is important that you always keep an open mind and an open eye to look out for different kinds of opportunities out there.

How to fund a house flipping project?

There are many creative ways to fund this project. If you have cash on hand I would say by far this is the best choice of funding, because you can literally be on the site, have a purchase contract ready to sign with the seller, and pay cash. If that is not an option for you at the moment, there are other ways to finance it, which you can read on our next blog post around different types of loans here.

Rehab to gain Sweat Equity

Once you got a property on hand, the clock starts ticking because the longer you hold the property, the more costs this project piles up. Even if you do not carry a loan, there are other on-going expenses, like utilities bills, property tax, insurance costs… etc. This is the time when rehab begins, meaning you got to scope out what type of fix-ups you need to work on, set a budget, and start working!

This is the time when you build up what we called “sweat equity” – that means you put in your own hard work towards the increase of property value (a.k.a. equity). Your work will be rewarded at the end.

Selling to close

Once the rehab works are done, it is time to list it for sale! Just remember, the clock is still ticking. At this stage, all the supposedly “hard work” is done, and what you need to do now is to stage the property, which means you decorate it with the intention to tailor it to your target buyers. For example, maybe you make it very cozy and feels like anyone’s next dream home; or you divide up the areas so the next buyer can visualize it as an airbnb location. When you stage, you need to know your audience!

Before you know it, offers pour in, you make a decision to pick not just the highest price offer, but the buyer that has the best chance to close on time (or early), and then you move on to your next house flipping project!

If this blog post sparks your interest to learn more about house flipping, you definitely should educate yourself more here: Flipping House 101