RECOMMENDED: Find the perfect business for you with our Business Ideas Tool.
House flippers buy outdated homes at a heavy discount, fix them up, and then sell them for a profit. The buyer may choose to complete the work themselves, or hire a team to complete the job.
Who is this business right for?
People with a passion for real estate and home improvement will do well in this business. Flippers need to understand how to make a home conform to what buyers in that area are looking for at any given time. They should also be highly organized, deadline-driven, and efficient.
What happens during a typical day at a house flipping business?
Whether the flipper does the work or not, they’ll still have plenty to do on any given day:
- Researching markets/neighborhoods/demographics
- Scheduling house inspectors, appraisers, etc.
- Upgrading the home
- Handling the sales process
- Filing paperwork
What is the target market?
Fewer and fewer people today want to move into a home that needs work, which makes home flippers in high demand around the country. Across every age range and demographic, this criteria is becoming more of the rule rather than the exception. From young millennials to retirees, the target market can be anyone who wants to buy a move-in ready home.
How does a house flipping business make money?
Home flippers make money by selling the home for more than they paid for both the property and the renovation. They may be working on several projects at once to maximize their profits.
What is the growth potential for a house flipping business?
Home flippers can expect a lot of competition in popular markets around the country. However, there's still plenty of room for additional flippers who have an eye for spotting homes with potential. The success of a home flipper will be determined by both the flipper’s sense of timing and their overall flexibility.
What are some skills and experiences that will help you build a successful house flipping business?
People with a background in real estate or construction work will likely find it easier to fit into this business. Owners will need to be able to spot a home with a heavily compromised structure before they buy a property that's more trouble than it's worth. The market can be a very tricky business to navigate, so having a head start can be the difference between success and failure.
What are the costs involved in opening a house flipping business?
Home flippers may not need very much to get started with their business. They may be able to take out personal loans to pay for everything from the down payment to renovation costs to the real estate fees. However, flippers will need to be extremely confident in their investment before they attempt to take on these financial risks. Otherwise, buyers will typically need at least 3% for their down payment for a conventional loan. They'll also need to pay for home insurance during the limited time they have the home, as well as closing costs.
What are the steps to start a house flipping business business?
Once you’re ready to start your house flipping business, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:
- Plan your business. A clear plan is essential for success as an entrepreneur. A few important topics to consider are your initial costs, your target market, and how long it will take you to break even.
- Form a legal entity. Establishing a legal business entity prevents you from being personally liable if your house flipping business is sued.
- Register for taxes. You will need to register for a variety of state and federal taxes before you can open for business.
- Open a business bank account. A dedicated checking account for your house flipping business business keeps your finances organized and makes your business appear more professional to your customers.
- Set up business accounting. Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
- Obtain necessary permits and licenses. Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
- Get business insurance. Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
- Define your brand. Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
- Establish a web presence. A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Select your state below for an in-depth guide on completing each of these steps in your home state.
What are some insider tips for jump starting a house flipping business?
Most flippers spend just under $60,000 on their repairs with the intent of making somewhere between 10 – 20% on their investment. Home flippers can certainly have their own goals when it comes to their business, but it helps to start with the averages. A home flipper is ideally trying to improve the home so that it reaches the upper end of the neighborhood’s price range.
Predicting the real potential of a home can be notoriously difficult to do, but the standard advice is always to buy a bad home in a good neighborhood. The flipper should know the key components that make a home sell in any given area. Whether that’s hardwood floors or an island in the kitchen, flippers need to meet the buyer’s needs without overspending on their budget. But since all home flippers will be starting with roughly the same strategy, home flippers will need to exercise discretion, caution, and bravery for practically every investment they take on.
Flippers may also need to be patient when it comes to finding the right buyer. It may take a while to locate someone who can fully appreciate the home for what it’s worth, so flippers need to be prepared to wait in order to turn the best possible profit. Successful flippers typically do as much of the actual home upgrades as possible — and they do it as well as any contractor can. They may live in the home to offset their other expenses and to ensure the home gets the ongoing attention it needs.
How to promote & market a house flipping business
Flippers can rely on real estate agents to help them promote and market the homes they buy. Hiring someone who specializes in flipped homes can make the sales process go that much faster.
Recommended: A website is essential for promoting your business and attracting customers. Weebly is a great tool.
How to keep customers coming back
Building up your reputation as a reliable flipper can make it easier to sell future homes. The more people know that they can depend on the longevity and quality of the work you do, the more likely it is your homes will sell for the asking price.
How and when to build a team
Most home flippers won’t need to build a team. They’ll instead work alongside other professionals, such as home inspectors, real estate agents, contractors, etc. However, there are plenty of home flippers who partner up with a friend, colleague, or family member. Having an extra person can make it easier to split the many details and duties of home flipping. However, flippers also need to be careful that they can work closely with someone for long periods of time without unnecessary conflict or drama.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a house flipping business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, check out our informative guide, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
How much can you charge customers?
Home flippers can charge whatever the market commands for the renovated homes. In popular areas, homes may spark bidding wars between buyers that ultimately push prices higher than the flipper could have imagined.
What are the ongoing expenses for a house flipping business?
Home flippers will need to pay closing costs, real estate fees and title fees on top of ongoing renovation costs. Most financial benefits for home loans are for conventional buyers only. Home flippers will typically pay full interest rates as well capital gains on the property they sell. Homes held for less than a year are taxed at the same rate as normal income. Homes held for longer than a year can range from 0% – 20%, based on the flipper’s total income.
How much profit can a house flipping business make?
Home flippers can make hundreds of thousands of dollars a year once they establish themselves in the business. Even a 20% profit on a $100,000 home is still $20,000. A flipper would only need to flip five homes a year at that rate to hit six figures.
How can you make your business more profitable?
Home flippers may want to think about starting their own side construction business. The owner can hire a team, teach them basic home improvement tasks, and then lend out labor for a certain rate. They can also consider running side businesses for teaching new home flippers how to break into a competitive game.