Cost to Flip a House: What To Know and How To Get Started

About one in three Americans work a side hustle to bring in more income. Whether that is owning a blog, flipping houses, babysitting on the side, or working two jobs, making money for retirement and investments has become a must for many Americans.

If you want to know more about how to flip houses, you’ve come to the right place!

Keep reading to learn more about the cost to flip a house and how to get started.

Choose the Right Neighborhood

The first thing you want to do when thinking about house flipping is to decide on the right neighbourhood.

To do this correctly, you have to spend time researching the real estate market in the areas you are looking at. Talking to realtors who know the area is a great place to start for this step. When looking at neighbourhoods, you should only look at the areas that are within your budget.

Each neighbourhood will differ in price, type of home, and the bang for your buck. If you are interested in the Chicago real estate market, click for more.

Understand the Cost to Flip a House

Knowing what you are going to put into a house that you are flipping is a crucial step in the process to flip house. But how do you make sure that you are going to make a profit on the house and that the time you spend flipping is worth the investment?

Follow the 70% Rule

Most realtors use the 70% rule. This means that you should only purchase a home at 70% of the after-repair value of the home minus the repairs it needs.

For instance, say you the AVR (after-repair value) of a home is $500,000, but it is going to cost $50,000 in repairs. 70% of this value would be $350,000. However, you still need to subtract the repairs which would bring it to $300,000.

When purchasing this home, you would ideally not want to spend more than $300,000 when purchasing it to flip the house.

Average Cost of Flipping a House

While there is not one number for every single house, there are key factors to consider when thinking about flipping a house.

Here are a few:

• Hiring contractors like plumbers, electricians, painters, real estate agents, and landscapers
• Building materials for repairs
• Buying new appliances if needed
• Cosmetic repairs like replacing cabinets or redoing the landscape
• Renovating a kitchen or bathroom
• Down payment on the initial house
• Property taxes
• Insurance payments
• Closing costs
• Utility costs
• Marketing costs

Depending on what the home looks like before purchasing it, the costs associated with house flipping will differ for each home but most of these points will come into play at some point in the process of flipping the house.

Finance the Project

Once you understand how much it is most likely going to cost you to flip the house, it’s time to figure out how to finance the project.

You could use cash if you have it lying around, but if you don’t, you need to make sure you have preapproval for a loan. If this is the route you choose to go, be sure you have a good credit score and have enough for 20% of the down payment. Realistically, you should apply for preapproval of the loan before looking into houses based on the budget you’ve set for yourself.

Know the Skills You Bring to the Table

Assessing your skillset is a great way to save money when house flipping. If you know how to deal with electricity issues, renovate kitchens, and paint, you could save money on hiring these contractors.

While doing a lot of it yourself can help you flip houses for cheaper, be sure you actually have the skills so you don’t find yourself out of money in the long run.

Make the Repairs

After assessing your skills and knowing what budget you have to work with, it’s time to make the actual repairs to the house.

Before you start, make a list of the most important repairs to make and as you go down the list, they should be less crucial repairs. This ensures you start with the most important ones while you have the money available.

Flip the House and Sell It

Now for the fun part! You’ve done the work and research needed to flip the house, and it looks like a brand new place. It’s time to sell the new home!

When you get to this point, you want to make sure the house doesn’t sit on the market for too long. If it does, the profits you will make decrease as time goes on.

To do this the fastest you can, working with a real estate agent is always a good idea since they have the expertise needed to sell the house and do it fast.

Are You Ready to Flip a House?

You understand the cost to flip a house. You know the right steps to follow to make sure you are doing it right and as quickly as possible. You know who to hire and what you can do yourself based on your skillsets.

If that’s the case, you may be ready to flip a house! It’s time to go digging into the real estate market and find a house that suits your desire for house flipping.

If you enjoyed this article, check out other articles on our blog! You’ll find plenty of other tips you’ll enjoy reading.

 

 

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