What is “House Flipping”

As this blog is all about flipping houses, I should probably take some time to define exactly what that means…

In it’s simplest form, flipping a house is the act of purchasing a property and then reselling it for a profit. Oftentimes, the property is purchased very inexpensively, either because it is “distressed” (i.e., in need of repair) or the owner of the property is desperate to sell (e.g., going through a divorce, got a new job out of town, is having financial difficulties, etc).

There are two basic strategies for flipping houses, each of which has it’s own benefits, drawbacks and risks:

Wholesaling. Wholesaling involves purchasing a property and immediately (oftentimes the same day or even at the same closing table) reselling it to another investor for a small profit. Wholesaling doesn’t require the house flipper to do any work on the house, and sometimes doesn’t even require the house flipper to put up the money for the house. A good wholesaler must be a strong negotiator and marketer, as he is merely turning around and selling the exact same property he just bought, but for a profit.

Rehab and Resale. This is what I do, and is probably what is most commonly thought about when someone hears the term “house flipping.” The investor will buy a property — generally at a large discount — bring in contractors to fix-up the property, and then resell the property, either to home buyer who plans to live in it or another investor who plans to rent it out.

To be successful in the house flipping business, you must be have a number of skills (or a backup team of folks to help you):

  • You have to be able to find great deals. This may involve a real estate agent, or may just involve spending lots of time talking to potential home sellers and negotiating deals yourself;
  • You have to be able to get houses renovated quickly and inexpensively. This often involves having a set of contractors who will renovate your properties skillfully and at a reasonable price;
  • You must be able to sell your properties, either to homeowners or other investors. Again, this may involve a real estate agent (recommended!) or may just involve selling the properties yourself (known as FSBO or “For Sale By Owner”);
    You must have the business and management sense to keep projects on-schedule and on-budget, and to make the proper renovation design decisions.

If you’re considering house flipping as a hobby or a business, we have lots of articles and content here at 123Flip.com that will help you jump-start your efforts. In addition, feel free to take a look at our First 50 Projects, check out our Blog to see what we’re up to today.

23 thoughts on “What is “House Flipping””

  1. Hey scott my biggestest problem is not finding the right information on the properties and making the frist offer happen. I know!i know! just do it! what adivse can you give me.

  2. Hi Scott,

    I found your website last night and I couldnt stop myself from reading it until 2:00AM. Your blog website and the content is amazingly helpful to newbies. Your success gives me a lot of confidence that a tech guy can also do realestate investment. Thanks very much for your generosity of sharing everything for your projects ! 🙂

    I am the stage to find an entry point to get my feet wet on this Real Estate Investment adventure.

    After Ive spent 2 months of reading and reserching, I found the following possible business models:
    1) TAX liens ( mostly due diligence to try to get higher probability to get the property not being redempted)
    2) Whole sale ( such as Cris Chico http://www.virtualwholesaling.com/ who also in your friends blog);
    3) Rehab & resale ( you business model);
    4) Pastive income such as Multifamily apartment ( I am subscribing to loopnet.com and looking for 20+ units in Chicago area, one time transaction and will exhaust my savings and credit);
    5) No money down “rent to own” flip ( such as Joe Crumps program http://www.joecrump.com/partner/, however his program is expensive – $10k);

    I am kind of overwhelming of the information of what do next. My question to you is, why did you decide to take this “rehab & resale” biz model instead of others twi years ago? Thanks a lot in advance.

  3. Hey Scoot,
    Im a newbie Real estate investor /Real Estate Agent in Massachusetts and i came across your blog and let me tell ya; this is the best information iv came across so fare. keep up the good work.

    Any way, Jack D had some really interesting questions. do you mind letting me know what you think about those five programs he mentioned?

    also, I seen in your rental application you had a Douglas county High as nearby high school. im a Douglas county high Grad, class of “06”….. Rick Dobbs class. Navy Q.B maybe you Know him.

  4. hello Jack D I m going to start a real estate investment company, we going to buy distress property, fixxer upper and other property what kind of license do i need in case i need please lets know thank you write me and i will cal you back thank and god bless you

  5. Hey Scott,

    I am a new investor but although I have been doing research for well over 6 months, i havent been able to get started mainly due to my inability to locate funding. Can you offer me some advise on this, please and thank you?

    1. Hi James,

      There is no quick answer to your question. Finding funding is one of the hardest parts of this business, but obviously, also one of the most important. Start with family and friends and determine if there is anyone you know that can help you with funding. If thats not an option, start talking to people like doctors, lawyers, etc who may have money set aside in their retirement funds and are looking for better returns (that you can provide them). And the next option is hard money. Its expensive, and youll need some of your own cash, but if all else fails, its the best way to go. If you dont have the cash to supplement the hard money, the last option is to find a partner who can provide you with the money; in return, you find the deal or somehow provide other support and get a cut of the profits for your time and effort. You may not get equal partnership if youre not providing the money, but anything is better than nothing.

  6. Hi Scott,

    Great site & thanks for all the tips and inspiration.

    Im working on my BP and hope to have something to present to potential investors by December. I have a few questions that I would love to get your feedback on.

    1) What do you believe is a fair ROI to an investor?

    2) In your experience, do you think that investors prefer a lower return that is guaranteed or an opportunity for a higher return, but no guarantees?

    3) Do you have or know of any templates for creating an investor contract?

    Any advice or wisdom that you can impart on me is greatly appreciated. Again, thanks for this most helpful site.

    Regards,
    Walter

    1. Hi Walter,

      Every investor is going to be different. Some will want a higher return, some control/involvement in the deal, etc. Some will be happy to take a smaller return, wont want anything to do with the deal, etc.

      One of the big factors that contributes to what the investor wants is whether he has real estate experience or not. In my experience, those who understand real estate investing generally want to be more involved and want a bigger return. Thats why I try to find investors who arent real estate savvy — they are likely happy with an 8-12% return on their money (a loan vs a partnership), and they dont want any involvement.

      Youll need to negotiate with each investor separately, and dont make any assumptions about what they are looking for until after youve spoken with them. Theyre all different!

  7. J,

    I stumbled upon your website last night, and I am hooked. I am going to be spending a lot more time on this site. And your comments are amazingly patient, you sound like a real good dude. You even left the spammer comment up and you were nice about it. Thanks for everything here, with all this effort its incumbent on me to get out of the office rat race and get my dreams off the ground.

  8. What kind of help can you offer a single Mom with ni real estate experience but a dream to succed in flipping houses for the sake of my 2kids… nothing but fear holding me back. I am in California and surrounded by vacant property with no knowledge of how to proceed. I have leads to lots of foreclosures in my inbox daily but what do I start with them first? How do I initiate to lock down a property and sell it? I am in a lake town so the opportunities are there and boating priv depends on this. Any help is greatly appreciated. 5627339739

  9. Hi,

    How much working time you think you have had per week at the start right now and going into the future in the flipping business? Is it more or less? You said in a different post about your business concept, that you focus on being a good manager which leads to less working hours on each property right?

    It would be cool if you could structure it lke this

    First year 7 days a weak 90 hours
    After 1 and a half years 70 hours
    Second year 60 hours
    Third year 40 hours
    Forth year till date 30 hours
    Expercted working hours…

    Or whatever the numbers look like for you

    Thank you for answering

    1. Hi Frantz,

      Everyone and every situation will be different. When I started, I was probably working 40 hours/week — but I hired a full-time project manager early on who could handle many of the day-to-day issues. Had I not hired him, I may have been working 70-80 hours/week.

      By the third year, I was working about 10-15 hours/week. But, keep in mind that when youre self-employed, even if youre not working a lot of hours, youre still on call 24/7 for phone calls and issues.

      Im now in my 6th year, and Im working harder than ever! Thats because were scaling up our business, trying new things, and starting to rehab in other areas of the country. In many ways, Im starting over and have to learn an entire new business.

  10. Hello Mr Scott,
    Gotta say, I am looking forward to digesting your whole entire blog, this article was the first step on my journey.
    I have been thinking of partnering up with an experienced rehabber and providing the cash for flipping, whats an appropriate profit split for this type of business relationship?
    Thank you

  11. Hello. Is there a reason why you hire a real estate agent instead of becoming licensed yourself? Also, how many hours do you estimate that it takes to be a successful house flipper? I am really passionate about the business, but right now I have kids at home and am not sure if I can put in a full-time effort. Thank you so much for all that you do.

    1. Hi Karli,

      Both my wife and I are licensed in multiple states, and we handle all transactions in areas where we feel we know the market (and the other agents) better than any agent we might hire. But, since we flip in multiple states, there are places where we feel other agents will do a better job of selling our properties than we would, so we go with them instead.

      In terms of how much time it takes, there are no hard rules for that. You can certainly be successful putting in fewer hours, but it will probably take longer to long, find deals and get them rehabbed. But, its better to work at the pace that works for you as opposed to trying to do more than your time allows…just be patient and expect the process to take a bit longer.

  12. Hello.
    How much time on average do you commit weekly on 1 flip? How reasonable it is to assume that you can do house flipping in addition to a regular 9 to 5 job?

    1. Hi Ivan,

      It takes a lot of time to prepare for your first flip, but it can certainly be done around a 9-5 job. While youre actually completing your flips, there are some nuances that youll have to take into account. For example, since you wont be able to check in on the site during the day, youll probably want a General Contractor who can manage things and provide you status updates (as opposed to hiring individual contractors). Also, youll need to spend a good bit of time during the evenings and weekends checking in on progress, talking to contractors, etc. But, if you give yourself extra time and hire people you can trust, its certainly possible to do flips with a 9-5 job.

  13. Hi:
    Im Julie. I live in Boston, Massachusetts.
    I am very interested in Real Estate Investing, most likely starting part time.
    I previously worked as a Bookkeeper at a Property Management Company and almost got my Real Estate Salesperson License.
    I am wondering where I should begin and if it would be beneficial for me to get a second part time position in the field.
    I have been reading everything on your site. Great job!!!

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