Flipping houses requires purchasing properties with the intent to renovate and sell them at a profit. The average net profit for flipping homes bought from distressed buyers or foreclosures can tally up to 40%. The industry does have its challenges, especially when buying older homes with unexpected problems requiring major renovations.
SWOT Analysis of a House-Flipping Business
Strengths: Ability to make money quickly, low risk of defaulting on the loans, and ability to change the atmosphere of a neighborhood by purchasing and restoring dilapidated homes.
Weaknesses: High cost of construction, which can outweigh potential profits, the long timeline for repairs and selling, inability to accurately budget for unexpected problems with older houses.
Opportunities: Government subsidies and tax incentives may be available in some cases as well as increasing home prices due to market conditions or areas that are going through urban renewal projects.
Threats: Overbuying too quickly without leaving enough room in the budget for unexpected costs or not being able to find buyers willing to pay the asking price. Competition from other house flippers and new home construction projects can also reduce profits.
To succeed in flipping houses, a real estate entrepreneur will need the financial resources and knowledge to identify distressed sellers or foreclosures, budget for renovation costs, and anticipate market trends when selling their homes. They must also consider legal risks associated with purchasing properties and ensure all repairs are done according to local housing codes. Finally, they must ensure that their marketing plan effectively attracts potential buyers. With careful planning, house flipping can be a lucrative investment opportunity.
Starting a Business Flipping Houses
If you like the challenge and hard work of flipping houses, starting a venture in the short-term real estate industry requires several steps.
1. Create a Business Plan
Creating a business plan remains the most vital step for starting any business (we have included a sample business plan below). A business plan for your house-flipping business ensures you keep to your goals, helps you estimate profits, and helps you find investors for your house-flipping projects.
Make sure to create an in-depth business plan. But if you don’t know how to write one, use the sample plan below the article to guide you.
Start by writing an overview of your business venture that details its purpose and vision. Include financial forecasts and identify any partners of the company.
Include a section on your competitors and the current demand for houses in your area. Next, define your strategy, services, existing capital, the amount required to start, and expected profits.
Now that you have a business plan, you are ready to take the rest of the steps required to start your business. Unless you initially plan to run the business from home, find a suitable commercial space.
2. Start a Network
Flipping houses requires resources to get each job done. Some of the most critical resources needed for the business are having the right network of craftsmen and having promising property availability.
However, you cannot find these unless you find reputable building material suppliers, contractors, and realtors to help with your end goal of keeping within a budget. Research online, contact your professional network, and ask family and friends about the best in your area.
3. Decide on Your Business Name and Entity
Brainstorm a business name to help make it easy to identify and include the keywords that indicate your industry. For example, “renovated homes.” You can also use software to help you generate an original business name that’s easy to remember. We have included a list of potential names at the bottom of this article.
Every business, including house-flipping, must register with their state to make it legal. However, before registering, you must choose a business entity type that offers you liability protection for your personal assets in case things go wrong. Two of the most common business entities preferred by businesses flipping houses are limited liability companies (LLCs) and corporations. Ask an attorney about your best option and register your business with the State Secretary.
4. Obtain Permits, Licenses, EIN, and Insurance
When you receive the approval of your business registration, you can contact your local chamber of commerce or attorney about the permit and licensing requirements for your city or county. These will also depend on the scope of the restoration work for each property.
The next step is to get an employer identification number (EIN) online from the IRS. You will need this number when hiring staff, filing taxes, opening a business bank account, and for loan applications.
Next, get the right insurance types for your house-flipping business. As an employer, you will need worker’s compensation insurance. General liability and commercial property insurance are also essential to help protect your business and properties from unforeseen calamities.
5. Source Suppliers and Contractors
Even if you plan to do most of the work yourself, you will need specialized contractors or workers for some tasks. With time you’ll build a network of trusted contractors, but in the beginning, you may have to rely on word-of-mouth or references.
Also, ensure you have reliable suppliers whose prices are not above your budget.
6. Sourcing a Team
Surrounding yourself with a team of qualified people will help you create a successful business flipping houses. For example, you may require a business investor, an industry expert, partner, and you will also need an attorney.
You have several choices when looking for a reliable team. Partnerships with people with specialized industry expertise, money, or skills often work well in the house-flipping sector.
Therefore, a realtor or property owner can help you find prospective properties, handle contracts, and help with reselling. On the other hand, owner or seller financing is another way to pay for the repairs before flipping.
Get legal counsel and sign the necessary contracts before proceeding with any collaborations for your home-flipping business.
7. Getting Financing
Now that you have everything required to start flipping houses, you need money to purchase a renovate your first flip. If you don’t have personal funds, your first thought might be to get a bank loan, but these are not always forthcoming for a new business with no profits to show.
Furthermore, house-flipping businesses require short-term loans of up to a year.
Some options include:
- Loans from friends and family
- Take a loan from your retirement plan if you aren’t planning on retiring soon ( ideal for your first flip)
- Combine financing from several sources (a small loan, personal funds, and a partner or investor)
8. Find Your First Deal
Several factors will ensure the success of your business flipping houses. These include the supply and demand of your local real estate market, cost of labor, and value appreciation of the completed home.
There are several ways to source properties, including auctions, real estate wholesalers, or traditional brokers. The idea is to find a house with the scope of renovations you can cope with and won’t take time to complete. The final cost of the renovation must never exceed your initial budget.
Armed with the knowledge required to start your business flipping houses, you can now implement your plan. First, ensure you remain committed to your initial business plan as you scout for the right property. Once you find a property, carefully calculate the renovation costs before buying and estimate your profits before committing to buying.
Always keep in mind that you will need to budget well above your estimates because it’s inevitable that you may find some difficulties along the way. Once you are ready to begin, bring your trustworthy team together to get the project off the ground, keeping in mind never to overspend.
1. Flip It Properties: Flip It Properties is a house-flipping business specializing in finding and renovating homes to resell for a higher value. We are dedicated to providing our customers with excellent service from the initial search to the completion of the project. We strive to be one of the top-rated house-flipping businesses in town by offering competitive prices, quality workmanship, and superior customer service.
2. Flipping Fantastic: At Flipping Fantastic, we make dreams come true! Our team of experienced professionals will help you find the perfect property for your needs and budget. From start to finish, you’ll get personalized attention and expert advice throughout each process – helping you make an intelligent investment while enjoying all the benefits of living in your dream home.
3. Flippin’ Good Homes: If you’re looking for an experienced house-flipping business, look no further than Flippin’ Good Homes. With our team of real estate professionals and contractors, we will work with you to find the perfect property and bring it up to code. We provide professionalism at every step of the process – from finding a property to flipping it into something special that won’t break the bank.
4. House Flip Pros: At House Flip Pros, we are passionate about transforming houses into beautiful homes inside and out. Our team comprises seasoned professionals who understand the local market and are dedicated to helping you get the most out of each property we work on. We specialize in house flipping projects and bring quality craftsmanship to every step of the process – from finding a great deal to turning it into an asset that will last for years.
5. Flips R Us: When looking for an experienced and reliable house-flipping business, turn to Flips R Us. Our team is made up of real estate professionals with decades of experience in the industry. We’re passionate about finding great deals and ensuring they reach their full potential to provide our customers with a successful outcome at the end of each project.
6. Flip Your Fortune: We take pride in helping our customers with their house-flipping projects at Flip Your Fortune. Our team of real estate and construction professionals brings an extensive knowledge base to each project – giving you the best chance at a successful outcome. From finding the right property to managing the renovation process, we’ll be there every step of the way.
7. Flip Masterz: Flip Masterz is an experienced house-flipping business specializing in transforming properties into beautiful homes built to last. We understand the local market and have worked on hundreds of successful projects. Our goal is to provide our customers with competitive prices, quality workmanship, and excellent customer service – so they can enjoy a great return on their investment.
8. The Flippers: At The Flippers, we are dedicated to finding and flipping the perfect property for our customers. We specialize in finding homes that have the potential for renovation at a great price so that we can make them into beautiful investments. With our team of experienced real estate professionals, construction crew, and customer service staff – you can rest assured that each project will be completed with care and attention to detail.
9. House Flips Unlimited: House Flips Unlimited is a house-flipping business with an experienced team of professionals who bring knowledge and skill to every project. Our goal is to provide our customers with quality workmanship while delivering outstanding customer service – all while staying within budget. From start to finish, we’ll ensure that everything goes smoothly – so that you can achieve the best outcome on your investment.
11. Flip My House: At Flip My House, we understand the importance of finding a good deal regarding house flipping projects. We offer a comprehensive range of services, from property scouting to renovations to help you maximize your return on investment. With our team of experienced professionals, we strive to provide each customer with the best outcome possible – so they can enjoy a successful house-flipping project.
12. Flippin’ It: Flippin’ It is an experienced house-flipping business specializing in turning homes into beautiful and profitable investments. Our real estate professional team has years of industry experience and brings knowledge and skill to every project we work on. We offer competitive prices and quality workmanship – so you can enjoy a great return on your investment.
13. Flip Kings: The Flip Kings are committed to helping our customers reach their goals when it comes to house flipping projects. Our team specializes in finding properties with potential for renovation at competitive prices so that we can make them into beautiful investments. With our extensive knowledge and years of experience in the industry, we strive to provide exceptional customer service and quality workmanship – so that you can achieve the best result possible on your investment.
14. House Flipping Heroes: House Flipping Heroes is a house-flipping business that provides quality workmanship and excellent customer service to each of our customers. Our team comprises experienced professionals passionate about helping our customers succeed in their house-flipping projects. We offer competitive prices and strive to provide you with the best outcome possible – so you can enjoy a great return on your investment.
15. Phoenix House Flipping: At Phoenix House Flipping, we specialize in finding properties with potential for renovation and turning them into beautiful investments for our customers. Our team of experienced real estate professionals has years of experience in the industry and brings knowledge and skill to every project we work on. We pride ourselves on providing superior customer service and quality workmanship – so that you can enjoy a great return on your investment.
16. Flipped Out: Flipped Out is a house-flipping business with decades of experience in the industry. Our team specializes in finding great deals on properties and providing quality workmanship to turn them into beautiful investments for our customers. We strive to provide each customer with the best outcome possible – so that you can enjoy a successful house-flipping project and a great return on your investment.
17. Flip This House: At Flip This House, we understand the importance of turning homes into profitable investments for our customers. Our team comprises experienced professionals who bring knowledge and skill to every project they work on to help you maximize your return on investment. With quality workmanship and excellent customer service, we strive to provide each customer with the best outcome possible from their house flipping project.
18. Flippin’ Out: Flippin’ Out is a house-flipping business that provides quality workmanship and excellent customer service with every project we take on. Our team of experienced real estate professionals helps customers find properties with potential for renovation at competitive prices so that you can enjoy a successful house flipping project and a great return on your investment. We strive to provide the best outcome possible for each customer – so that they can reach their goals.
19. Fliptastic: At Fliptastic, we are passionate about helping our customers succeed in their house-flipping projects. Our team of experienced real estate professionals understands the importance of finding properties that have the potential for renovation at competitive prices – so that you can maximize your return on investment. We offer quality workmanship and excellent customer service – so that each customer can enjoy a successful house-flipping project.
20. FlipIt Houses: FlipIt Houses is dedicated to ensuring our customers reach their goals regarding house flipping projects. Our team has years of experience in the industry. It provides quality workmanship with every project we take on to provide superior customer service and achieve the best outcome possible for each customer. We believe that investing in quality workmanship and excellent customer service will ensure that our customers enjoy a great return on their investment.
21. Flippin’ Profits: Flippin’ Profits is committed to helping our customers succeed with their house-flipping projects. Our team of experienced professionals brings skill and knowledge to every project we work on – all to maximize your return on investment. We offer competitive prices and strive to provide superior customer service – so that you can enjoy a successful house-flipping project and the best outcome possible from your investment.
22. FlipStar Properties: At FlipStar Properties, we understand how important it is for you to succeed in your house-flipping projects. Our team of experienced professionals provides quality workmanship and excellent customer service with every project we take on to help you maximize your return on investment. We strive to provide each customer with the best outcome possible from their house flipping project – so they can enjoy a successful venture.
23. FlipTown: At FlipTown, we are committed to providing our customers with quality services and superior customer care regarding their house-flipping projects. Our team is made up of real estate professionals who bring years of experience in the industry and skill to every project we work on – all to help you find great deals at competitive prices and achieve an excellent return on your investment.
Sample Business Plan for a House Flipping Business
XYZ is a house-flipping business located in Anytown, USA. We specialize in purchasing run-down properties and remodeling them to be desirable to potential buyers. We aim to purchase undervalued properties, add value through renovations, and then resell the homes at a profit.
Our mission is to provide quality housing in Anytown and the surrounding areas while delivering the highest possible returns on our investments. We pride ourselves on providing affordable, well-maintained homes to increase the community’s desirability.
• To purchase 5 properties in year one and 10 in year two.
• To complete renovations within 6 months of purchasing each property.
• To resell renovated units within 12 months of the purchase date.
• To maintain an average return-on-investment rate of at least 15%.
• To remain profitable through sound financial management and disciplined decision-making.
Anytown is a desirable area of town with solid demand in the housing market. Our target demographic comprises young couples and families looking to purchase their first home or move up in the real estate game. We anticipate an average price per house of $200K and an average return on investment rate of 15%, allowing us to remain profitable while providing quality services.
XYZ House Flipping will be operated as a sole proprietorship owned and managed by John Doe. Mr. Doe is responsible for all aspects of the business operation, from acquisition through resale, including all financial management, employee supervision, marketing, sales, customer relations, and more.
XYZ House Flipping anticipates an initial start-up cost of $50,000. This will cover purchasing the first property, renovations, and other costs associated with starting a business. We expect that from this initial investment, we will be able to generate a return of at least 15%. All funds generated from house sales will be reinvested into new properties as long as returns align with our investors’ expectations.
As outlined in this business plan, XYZ House Flipping is committed to providing quality housing at affordable prices while maintaining solid returns on investments. With sound financial management and disciplined decision-making, we anticipate becoming one of Anytown’s leading real estate businesses within two years of operations.
Thank you for considering XYZ House Flipping as a potential business partner. We look forward to discussing the details of our plan with you further.