Mastering Residential Real Estate Flipping: 10 Essential Keys for Success
Learn to navigate the art of house flipping — expert tips for a profitable residential real estate journey.
Flipping houses has become more than an investment strategy. You can’t swing a hammer these days without hitting a flashy, somewhat glamorous depiction of beautiful flipped homes on television and social media. But flipping residential real estate is more involved and challenging than the half-hour TV shows and 90-second TikTok clips would have you believe. To succeed at residential real estate flipping, you’ll need to keep these 10 keys in mind.
1. Research first
Successful residential real estate flipping begins with lots of research and planning. Don’t let the excitement of a new project cause you to leap before you look. Take the time to research the market in which you plan to invest, looking at property values and the types of housing that are more likely to sell. This research also should include looking for up-and-coming neighborhoods with the potential for a higher return on investment.
2. Build a better budget
Flipping residential real estate requires more than the capital to cover a home’s price. Many new investors neglect to include the total cost of renovation (including a 10% margin for overage), taxes and utilities during the rehab, and how much it costs to sell the home once it’s done. Build a better budget by including these expenses and extra funds to cover unexpected costs.
3. Don’t pay too much
Don’t start your flip already in the hole. There are various ways to determine if a potential property is worth the money. Use the 70% rule (only paying 70% of a house’s projected after-rehab valuation for the initial purchase), taking into account the home’s location and size, as well as real estate trends in the area. It also helps to find the right loan for your property to ensure you aren’t paying too much as you rehab the house.
4. Assemble your team
Teamwork makes the dream work, and nowhere is that more accurate than in residential real estate flipping. Even if you’re a skilled contractor who can easily envision the final product, you’ll need a team of reliable people working with you to bring that vision to life. This includes a real estate agent, skilled people in the trades, an accountant and a knowledgeable closing attorney. Once you have a team in place (and a couple of flips under your belt), you might start to expand your investments, buying multiple homes in cash to maximize profits.
5. Move quickly
You have a plan, and you have assembled your team. Now it’s time to move quickly. The faster you can complete a renovation or rehab and get your flip to market, the less you’ll pay in holding costs, such as utilities or taxes.
6. Don’t skimp on quality
Although working quickly is key to maximizing your profits, it doesn’t mean you should skimp on quality or cut corners when it comes to your rehab or renovation. Many unscrupulous residential real estate flippers focus on cosmetic updates and ignore structural issues or dangerous problems with a home’s utilities. For best results, ensure your work balances quality with speed, and that all local codes and building regulations are followed.
7. Price it properly
Pricing a flip appropriately when it’s completed is essential. Price it too low, and you won’t make the profit you need to move on to the next property. Price it too high, and people will either choose to rent over buying or find another property altogether.
8. Mind your marketing
It doesn’t matter how gorgeous the property is or how fine your craft is if you don’t market your flip well. Hire a professional photographer to take pictures and videos, then use a web designer and social media expert to create and promote interactive tours. Make sure your marketing targets your potential buyers, and make it easy for them to get in touch via email, DM or phone call.
9. Negotiate carefully
You will, of course, need to have a number in mind when you price your property, but be prepared to negotiate that number and the terms of the sale. This might mean accepting a slightly lower price for a faster closing (which saves you carrying costs), or it might mean holding on to the property for a full-price deal.
10. Learn from the process
Investing in real estate is a process of continuous learning. Those who are successful in residential real estate flipping know that the market is constantly changing, with new technology, trends and regulatory changes adding to its complexity. Stay open to the lessons each residential real estate flip can teach you. Successes and failures both offer a chance to get better at what you do.
Luke Babich is the Co-Founder of Clever Real Estate, a real estate education platform committed to helping home buyers, sellers and investors make smarter financial decisions. Luke is a licensed real estate agent in the State of Missouri and his research and insights have been featured on BiggerPockets, Inman, the LA Times and more.