Real estate investing can be a profitable business. Plenty of people do it, including hundreds of HomeVestors® franchise owners. However, many people struggle in this line of work. Here, we will help answer the question: how much does it cost to flip a house successfully?

It Starts with a Plan

The best way to lose your shirt in house flipping is to go into a project without a plan. You need to know your costs – from taxes to contractor fees – as accurately as possible. If you’re new to house flipping, take time to estimate your costs appropriately. If you must guess, go high and include a contingency line.

Here are some of the costs to plan for when evaluating the purchase price of a home you are considering for a flip.

How Much Does It Cost to Flip a House? Carrying Costs

• Every property purchase comes with carrying costs. These include:
• Closing costs
• Taxes
• Permits (for larger renovations)
• Insurance
• Financing fees
• Cost to market the property for sale

If you’re renovating a condo, you may also have homeowners’ association fees that must be paid while you renovate. These fees will vary with each property purchase, which is why a financial plan is so critical.

How Much Does It Cost to Flip a House? Renovations

Angi has broken down the renovation costs room by room in an article you can use as a guide for house flipping. While you may not perform a full renovation in each room, there are some good nuggets of information here that can help you budget for renovations. For example:

• Renovation costs could vary from $15 to $60 per square foot on average.
• Older homes can have more expensive renovations to update plumbing, electrical, and HVAC systems.
• Labor costs could range from $20 to $150 per hour and vary by location.

Being able to estimate your renovation budget is key, or you can lose your profit quickly. Take the time to gather information in your local area so you can best plan your renovations.

How Much Does It Cost to Flip a House? Selling the Property

You need a plan of how you will sell the property before you purchase it. Will you work with a realtor or sell it on your own? Do you have a network of interested buyers? Remember, the longer you hold onto a property, the more carrying costs you incur.

The selling prince also helps determine how much money you can spend on the property renovations and still come away with a healthy profit, so it’s a critical piece of the puzzle. Be honest with yourself about your strengths here; this is not a place to try and do it yourself to save money.

How Much Does It Cost to Flip a House? The 70% Rule

Many in the industry use the 70% rule as a guide when it comes to estimating house flipping profit: limit your expenses to 70% of the after-repair-value (ARV) of the house. For example, if someone were to use this rule to estimate the value of the house after renovations to be $400,000, then they shouldn’t spend more than $280,000, less rehab expenses, on the house. As you become more proficient in house flipping, you may be able to chart your own percentages.

Tips for Saving Money on House Flipping

You can’t just shop at thrift stores to lower the costs of house flipping. Here are some real tips when evaluating how much it costs to flip a home:

• Plan ahead: when you know what you’re looking for, you’re less likely to make reactionary purchases that put you over budget.
• Know the ROI: spend your money on renovations that provide a better return on investment and easily justify the selling price.
• Organize the work: either hire a contractor or be very adept at organizing the contract workers in the order that you need them. Having to get the same workers back several times will increase your expenses.
• Have good financing: even with the best plans, property flips can take longer than expected so solid financing is a money-saving strategy. Spending the time to secure your best financing rates for the project gives you more budget for increasing the property value.

Need A Solid House Flipping Strategy? Try HomeVestors®

HomeVestors is a house flipping franchise. We developed a proven system for every aspect of the business, from choosing the right property to creating an accurate renovation budget and then selling to earn a profit. We have also created proprietary applications that maximize your time in various aspects of the business.

If you want to know how to start flipping houses, in a way that won’t deplete your savings, you may want to consider joining the HomeVestors franchise.

HomeVestors® Training

HomeVestors training covers key elements of the house flipping process including property acquisition, gathering comparables, estimating after-repair-value, and property valuation. We also train on the administration and operation of the franchise, and on our proprietary software and programs:

• UGVille®: A platform developed to help you manage your business and optimize lead management for buying, repairing, and selling houses.
• ValueChek®: An application designed to help franchisees more accurately evaluate a property, develop a list of repairs, and estimate the cost of those repairs so purchase decisions can be made on the spot.
• DealVestors®: An online platform created to wholesale properties to investors.

We also invest in our franchisees as business owners by providing training on isolating and working to your strengths, goal setting, time management, and investor development. As you become more proficient in house flipping, we recognize that your goals can change as to how you want to build the business and we support you in advancing in the business.

Property Leads and Property Sales

HomeVestors® owns the We Buy Ugly Houses® campaign which connects motivated sellers to our franchisees. This is just one of the tools we have available to access off-market and on-market leads that suit the house flipping business.

We spend more than $10 million in marketing and advertising to draw buyers and sellers to the HomeVestors brand. When you have a budget at this level, you grow the impact of the brand and draw the clientele in a way that wouldn’t be possible for independent house flippers. You need houses to flip in order to have a business, and you need to sell those houses in order to make a profit. HomeVestors leverages the strength of the franchise network to pursue high-level marketing.

Contact HomeVestors® for More Information

House flipping is an impactful business that provides people with a way to earn an income while making their communities better. When you have a system in place to make that happen, it can be a lifestyle with many perks.

If you’re interested in starting a house flipping business, we would like to speak with you. Contact us to learn about what we can offer that might make the decision easier as you explore this industry.