The Fastest Way to Flip a Property for Profit

Flipping houses may look simple on HGTV but it’s not as easy as it looks.

However, done the right way, a house flip can be incredibly profitable. In a short amount of time, you can make smart renovations and sell the house for a nice profit.

Find The Property

There are numerous ways to find undervalued properties.  You could simply look on your local MLS to find properties or talk to local agents that may have pocket listings.  Then there are wholesalers who are looking to sell properties that they have found for a quick buck. Then you could also do your own marketing to find these properties.  Some ideas are direct marketing using postcards or letters to get the sellers attention.  There is digital marketing like sending emails in mass to potential seller or using text or even ringless voicemail services.  In addition, you can put signs out in the area with some type of catchy tagline, your phone number, and a website to send them too. Many people have properties that they just do not want to put in the time or energy to fix up and they will call you.  You can also call fsbo (for sale by owners) and landlords that may have properties that they no longer want to own and are tired of tenants, toilets, and termites.  Finally, it is important that you get out and network.  For example, you could join a local real estate investment club or meetup group to meet people and find deals. 

Run The Numbers

The next step would be to quickly run the numbers to determine whether it’s something that you should pursue. It’s general rule of thumb is what we called the 70% rule. This helps you avoid overspending on a property that will give you little return on your investment. It works like this. You buy the property for 70% of its after-repair-value (ARV) less the repairs.

For example, if the ARV is $200,000 start by multiplying by 70% and then subtract out the repairs.  In this example repairs are $20,000.

$200,000 x .7 = $140,000

$140,000 – $20,000 = $120,000

That means the purchase price of the home needs to be no more than $120,000. Thar leaves you making a $60,000 profit when you sell the home for its after-repair value at $200,000.  Now you must factor in other expenses like taxes, insurance, closing costs and commissions.  The tax and insurance will not be very much since it typically takes only 4-8 months to complete the fix and flip.  You will still make a fantastic profit. 

Make The Right Renovations

Spend your money wisely and make the right renovations to maximize the profit on the home. For example, you don’t want to put in $40,000 into custom cabinets for a $200,000 house. Don’t underestimate the power of small repairs such as fresh coat of paint, updating the hardware, new lighting, refinishing the existing cabinets, updating the appliances, and new landscaping.  Finally, it is important to have nice flooring, but it does not have to be expensive.  The luxury vinyl plank (LVP) is now used for the flooring in many houses and is very affordable, durable waterproof and looks great.  It is a good idea to get guidance from your local real estate agent to find out which renovations increase the value of the house and which renovations really add value.  The agent can also help determine the property value when you are buying and how to properly price it to sell quickly.