How much do house flippers make? A guide to flipping houses
Flipping houses can be a full-time business… or something you do 1-2x a year to boost an ROI on your investment money.
Whatever your position and interest in real estate investing and flipping houses we’ll dive into four things in this article:
- How much flippers make
- How to increase your net profit per house
Let’s dive in…
Gross Profit of a Flipper:
All this will depend on your average gross profit per transaction and your market (higher median price home areas are going to have higher gross profit and margins.
So, we’ll give you a breakdown below…
Gross profit per house flipped: $20,000-$80,000
Full time-business (20-50 houses per year): $400,000 – $4,000,000
Here are some other stats:
- According to ZipRecruiter.com the average house flipper nets $140,000.
- According to CBS news, the average profit per deal is $70,000.
- According to Newsilver.com the average ROI on a flip is 10%-20%.
How to increase profits flipping houses
In the real estate world, profit is king. And when it comes to flipping houses, every extra dollar in profit can significantly impact your bottom line. One of the most effective strategies to increase your margins is to venture off-market. But what exactly does that mean?
Let’s unravel every strategy to increase in your profits as a house flipper…
1. Going off-market
“Going off-market” is like finding those hidden gems in a thrift store, the ones not displayed in the window but tucked away, waiting for someone to spot them. Essentially, you’re bypassing the traditional home-listing platforms, where competition can be fierce, and you’re tapping into opportunities that many others may not see. By doing so, you’re more likely to buy at a discount, and as the saying goes, “You make money when you buy, not when you sell.”
Let’s dig into some specific strategies for finding these off-market opportunities:
1. Buy from wholesalers:
Wholesalers are like your treasure hunters. They specialize in identifying distressed properties, securing them under contract, and then selling those contracts to investors like you. By purchasing from a wholesaler, you’re getting a property that’s been pre-vetted for profitability. However, it’s crucial to build a solid relationship with trustworthy wholesalers who truly understand the local market and can offer genuinely lucrative deals.
2. Direct mail:
Ever received a postcard in the mail saying someone wants to buy your house? That’s direct mail in action. This strategy involves targeting specific homeowners, often in niche markets or circumstances; You’re buying real estate deals at a discount because you’re going directly to sellers.
Maybe they’re in pre-foreclosure, are absentee owners, or simply have owned the property for over a decade. Regularly reaching out to them with a compelling offer can land you some sweet deals. The trick is consistency. A one-off mailer might get overlooked, but monthly reminders can create a sense of urgency and bring potential sellers to your doorstep.
3. Pocket listings from agents:
This is like having a backstage pass at a concert. Some homeowners want to sell, but for various reasons, they don’t want to publicly list their homes. Real estate agents are privy to these “pocket listings.” By building strong relationships with local agents, you can get first dibs on these properties. In return, offer them something enticing – perhaps an exclusive right to list the homes you renovate. It’s a win-win situation.
4. Cold calling:
It might sound old school, but it’s still effective. Much like direct mail, the goal here is to target homeowners in niche circumstances. Equip yourself with a solid script, a can-do attitude, and thick skin (because let’s face it, not every call is going to be a pleasant one). But persistence can pay off. Remember, every “no” is one step closer to that golden “yes.”
By embracing these off-market strategies, you’ll be well on your way to enhancing your profit margins in the house-flipping game. Because in real estate, as in life, sometimes the road less traveled can lead to the most rewarding destinations.
5. Organic SEO sellers
There’s a large number of home owners searching on Google: “how to sell my house fast”.
Many of them will take your cash offer in a heartbeat.
Set up a website and do some SEO work to getting your website to rank.
Below, in our “tools section” we have the top website builder for investors that can set up a website in 10 seconds.
6. Driving for dollars:
This is the strategy of driving around and marking properties that looked distressed. Then reaching out to the owners of that property to ask if they want to sell it.
You can do this via pen and paper, or via the app we recommend below.
We suggest driving for dollars every week; cruising the neighbors hoods looking for:
- Houses with overgrown grass
- Boarded up houses
- Newspapers piled up
- Needs lots of repairs
- Looks vacant
Tools to use when going off-market:
Data provider: If you’re sending mail or cold calling use Propstream (here’s our review of them with pricing and features), to pull hot niche lists.
Dialer: a single-line dialerr will save you a TON of time. The one we recommend is Batchleads (here’s our review)
Driving for Dollars app: If you’re driving for dolllasr looking for distressed properties checkout our review of the top Driving for dollars app that allows you to mark properties and even market to these distressed properties from your phone.
CRM: You need to keep track of these properties. You need a CRM if you want to be organized and not lose deals. Here’s our list of top ten CRMs for active investors… here’s the number recommended CRM for most newer investors, RealeFlow.
Website: The number one vendor that most investors use for creating a website is Carrot — see our pros and cons and pricing here.
Finding owners: If you’re out looking for deals, there will be times when you can’t find the owner that simply. Use any of our recommended cheap skiptracing tools to find owners in minutes.
2. Faster Turnaround
One of the rarely sung heroes of the house-flipping world is time, or, more precisely, the efficient use of it. Imagine you’re on a seesaw, with profits on one side and time on the other. When one goes down, the other lifts. In the realm of real estate, time indeed is money.
The longer a property sits under your name, the more expenses accrue. You’ve got holding costs, which might include loan interest, property taxes, utilities, and maintenance, among other things. Then there’s the opportunity cost. Every day that you’re not selling one property is a day you’re not buying and starting on the next one.
Here’s a simple illustration:
Let’s say you aim to flip four houses a year, each taking three months from purchase to sale, and you net $50,000 from each. That’s a cool $200,000 a year. But what if you could trim that timeline down to two months? Suddenly, you’re flipping six houses a year, netting a potential $300,000. That’s a 50% increase in profits, all from a mere month’s savings in turnaround time.
So, how do you accelerate this process? Here are some ways:
Strong Initial Assessment:
The first step to a faster turnaround is knowing what you’re getting into. By performing a comprehensive initial property assessment, you can foresee potential issues and avoid unexpected repairs down the line. It’s always better to be overly cautious at this stage than overly optimistic.
Assemble a Reliable Team:
A dependable crew can be the difference between a project that takes two months and one that takes five. This means hiring experienced contractors who have a track record of delivering quality work on time. It might cost a bit more, but time saved is money earned.
Streamlined Decision Making: Limit the number of choices you have to make during the rehab process. Maybe you decide on a set color palette or a specific type of finish for all the homes you flip. This way, you don’t have to rethink these details every time, speeding up the process.
Effective Marketing: Even before the final touches are put on a home, start the marketing process. The goal is to have a buyer lined up the moment the property is ready.
Strong Real Estate Network: Relationships matter. Knowing a real estate agent who has buyers ready or being connected to a community eager for renovated properties can significantly cut down on selling time.
Remember, in the world of house flipping, agility is a superpower. The faster you can move from one project to the next, the quicker you can recycle your profits, amplifying both your deals per year and your bottom line. As you get more experienced, you’ll find rhythm and flow in this dance, and soon, you’ll be waltzing your way to higher profits.
3. Use Private Money to increase your flipping profits
Ah, the lifeblood of real estate investing: capital.
While flipping houses can indeed be profitable, the initial capital outlay can be a daunting hurdle for many. Whether you’re just dipping your toes into the house-flipping pool or you’re a seasoned pro, leveraging other people’s money (often referred to as OPM in the investing world) can significantly boost your profitability and scaling potential.
Enter private money lending, a somewhat lesser-known but incredibly powerful tool in a house flipper’s toolbox.
Here’s a peek behind the curtain:
Private money lenders aren’t institutions or businesses or transactional lenders. They’re individuals, like a retired couple looking to grow their savings or a successful businessperson looking to diversify their investments. They’re folks with funds but maybe not the time or inclination to do the flipping themselves.
So, how does it work?
Negotiating the Terms:
Unlike institutional lenders, terms with private money lenders can be a lot more flexible. You’re not dealing with a corporation with set policies; you’re negotiating with an individual. Typically, you might offer a 9%-12% annual interest rate, which is attractive to them, especially in a low-interest-rate environment.
It’s crucial to cultivate a relationship built on trust. These are real people putting their hard-earned money on the line. Regular updates, transparency, and a track record of successful flips can go a long way.
Leveraging to Scale:
Once you’ve got a private money source (or several), you’re no longer solely reliant on your own capital or more expensive lending avenues. This means you can take on multiple projects simultaneously, exponentially increasing your flipping potential and, in turn, your profits.
Recycle and Repeat: As you complete projects and repay your lenders, you’re solidifying your reputation as a reliable borrower. This can open doors to more funds and potentially even better terms in the future.
But, why go this route?
Well, consider this: institutional or hard money lending can often come with higher interest rates, stricter terms, and a host of fees. Private money, while still a business transaction, is more personal. It’s about relationships, mutual benefit, and growth for both parties.
In essence, using private money in your house flipping ventures is like having a supercharger in a car engine. It propels you faster, allowing you to take on more projects and supercharge your profits. And just like any partnership, with trust and transparency, it can be a game-changer in the real estate investment arena.
3. Be the General Contractor – Control Rehab Price
When you’re knee-deep in the world of house flipping, one decision will loom large over every project: Who’s in charge here? At the heart of this decision is whether you should be the general contractor (GC) or hire a professional one. Before you tilt your head and think, “Well, how hard can it be?”, let’s get a bird’s eye view of the terrain.
Being a GC isn’t just about donning a hard hat and wielding a clipboard. It’s about overseeing the entire rehabilitation process, from demolition to the final coat of paint. You’re the maestro, orchestrating the electricians, plumbers, painters, and everyone in between.
Why would you want to be the GC?
– Cost Efficiency:
Hiring a GC often means paying them a premium for their expertise and management skills. By stepping into the GC role, you can shave off a significant chunk from your rehab costs. More money in your pocket? Always a good thing.
If you’ve ever watched a home renovation show, you know that things don’t always go as planned. Being the GC lets you have the final say, ensuring the project aligns with your vision and standards.
– Learn and Earn:
Especially if you’re new to the game, being the GC offers a steep but valuable learning curve. You’ll gain insight into every nook and cranny of the rehab process, making you a better and more informed investor with each project.
Why might you opt for a professional GC?
Being the GC isn’t a walk in the park. It demands time, energy, and a significant level of commitment. If you’re someone who thrives on networking, closing deals, and finding the next big project, then managing rehab might take you away from what you do best.
A professional GC brings experience to the table. They can spot issues you might miss, have established relationships with subcontractors, and can often negotiate better rates on materials and labor.
– Peace of Mind:
Let’s be honest, not all of us are cut out for the world of construction management. For some, the peace of mind knowing a professional is handling the nitty-gritty is worth every penny.
In the end, it boils down to a blend of your interests, skills, and where you want to spend your time.
If you’re someone who loves the thrill of seeing a home transform and has the patience to manage the intricacies, donning the GC hat might just be your ticket to higher profits. On the other hand, if you value your time and prefer to use it scouting for the next big deal or building relationships, then bringing in a professional GC might be your best bet.
Both roads can lead to success; it’s all about finding the path that’s right for you.
Wrapping It Up
There you have it, the nitty-gritty details of house flipping and, more importantly, how to maximize those profits. But if there’s one key takeaway from all this, it’s that flipping houses isn’t just about real estate – it’s about strategy. It’s about recognizing the delicate balance between art and efficiency. While each house has its own story and potential, the most successful flippers implement streamlined processes and informed strategies.
Remember, while the numbers can be tantalizing – with gross profits ranging dramatically and ROI percentages that can make any investor’s heart race – the foundation (pun intended) of successful flipping lies in understanding your market, knowing where to save and where to spend, and continuously learning and adapting.
Flipping is more than just buying low and selling high; it’s about transforming properties through informed, strategic decisions. Whether you’re starting out, looking to refine your process, or just curious about the world of real estate flipping, always remember to prioritize knowledge and strategy over sheer gut instinct. With the right approach, the world of house flipping isn’t just profitable; it’s profoundly rewarding.