The premise sounds simple: buy a rundown house at a bargain price, renovate it, and sell it for a healthy profit. Television makes house flipping look easy—quick montages of demo days, shiplap installations, and smiling buyers handing over fat checks. The reality is more complex. House flipping is a legitimate real estate investment strategy that has created substantial wealth for many investors, but it requires careful analysis, adequate capital, project management skills, and the ability to handle unexpected problems without panicking.
Understanding whether flipping is right for you means honestly assessing your skills, resources, and risk tolerance. Unlike rental property investing where you build equity slowly over time, flipping concentrates your risk into a single project with a defined timeline. When it works, the returns can be impressive. When it doesn't, you can lose your entire investment and more.
What Is House Flipping?
At its core, flipping involves purchasing a property below market value, making improvements that add more value than they cost, and selling at a higher price. The profit comes from the spread—the difference between your total investment (purchase price plus renovation costs plus holding costs plus selling costs) and the final sale price.
Most successful flips involve properties that need cosmetic updates rather than major structural work. Kitchens and bathrooms drive the most value, followed by curb appeal, flooring, and paint. Smart flippers focus on improvements that buyers notice and pay for—not over-improving beyond what the neighborhood supports. You might love professional-grade appliances and marble countertops, but if the comparable sales in that neighborhood top out at $250,000, you won't recoup luxury finishes.
The typical flip timeline runs three to six months from purchase to sale, though this varies dramatically based on the scope of renovation, contractor availability, and local market conditions. Every month you hold the property costs money—loan payments, property taxes, insurance, utilities—so speed matters without sacrificing quality.
The 70% Rule
Experienced flippers use a simple formula to quickly evaluate potential deals. The 70% rule states that you should pay no more than 70% of a property's After Repair Value (ARV), minus the cost of repairs. This buffer protects your profit margin and provides room for the inevitable surprises.
For example, if comparable homes in the neighborhood sell for $300,000 after renovation (your ARV), and you estimate $50,000 in needed repairs, the formula gives you a maximum purchase price of $160,000. That's ($300,000 × 0.70) minus $50,000. The 30% margin covers your holding costs, selling costs (typically 8-10% including agent commissions and closing costs), and your profit.
The 70% rule is a screening tool, not an absolute requirement. In hot markets where properties move quickly, some investors work with tighter margins. In slower markets or with larger projects, you might want even more buffer. The key is understanding what's included in that 30%—and ensuring your numbers leave room for the unexpected. Renovation projects almost always cost more and take longer than initial estimates.
Finding Flip Properties
The hardest part of flipping isn't the renovation—it's finding deals that actually work. In a market where everyone has access to the same listings, properties priced low enough to flip profitably don't sit around waiting for you. Successful flippers develop multiple sourcing channels and often find their best deals off-market.
Foreclosures and bank-owned properties (REOs) can offer substantial discounts, though competition has intensified. Banks want to sell quickly and often accept below-market offers, but they sell properties as-is without negotiation on condition. Finding these properties requires monitoring foreclosure listings, attending auctions, and building relationships with asset managers at banks and servicers.
Estate sales present opportunities when heirs need to liquidate property quickly. Homes owned by elderly sellers often haven't been updated in decades—exactly the kind of dated-but-solid properties that make good flips. Direct mail to probate filings is a common strategy, though you're competing with other investors doing the same.
Distressed properties with code violations, deferred maintenance, or motivated sellers (divorce, job relocation, financial distress) can offer deals if you're patient. Driving for dollars—systematically canvassing neighborhoods and noting properties that appear neglected—remains an effective if time-consuming approach. The owners of these properties often don't want to deal with listing and showing; they'd prefer a quick, easy cash sale.
Wholesalers are investors who find deals and sell them to flippers for a fee. They do the legwork of finding motivated sellers and negotiating contracts, then assign those contracts to investors who actually renovate. Working with wholesalers adds a cost (their fee), but it can save you significant time if you find reliable ones who understand your criteria.
Financing Your Flip
Unlike traditional homebuying, flipping typically requires specialized financing. Conventional mortgages don't work well for several reasons: they take too long to close (sellers of distressed properties want quick closes), they require the property to be in habitable condition, and they have seasoning requirements that prevent quick resale.
Hard money loans are the most common financing source for flippers. These are short-term loans (typically 6-18 months) from private lenders who focus on the property's value rather than the borrower's credit. Interest rates are higher—often 10-15%—and you'll pay points upfront (1-3% of the loan amount). But hard money closes quickly, funds renovation costs, and is designed for this purpose. Lenders typically loan 65-75% of the ARV, which is why having cash reserves is essential.
Private money from individuals—family, friends, or private investors you've networked with—can offer more flexible terms than hard money. These arrangements are negotiable: you might offer an investor a fixed return or a percentage of profits in exchange for funding. Building a network of private money lenders is valuable for any serious flipper.
Home equity from another property you own can provide inexpensive capital for flipping. A home equity line of credit (HELOC) at 7-8% interest beats hard money at 12-15%. The risk, of course, is that you're putting your home on the line if the flip fails.
Cash is king in flipping. Cash offers close fastest, have the most negotiating power with sellers, and eliminate financing costs. Many successful flippers start with hard money, build capital through profits, and eventually transition to self-funding their projects. The savings on interest and points flow directly to your bottom line.
Renovation Strategy
The money in flipping is made in the spreadsheet, not the tool belt. Your renovation plan should be established before you close, with detailed budgets and timelines. Every dollar you spend should add at least that much in value—ideally more. This requires understanding what buyers in that neighborhood actually want and will pay for.
Focus on kitchens and bathrooms first. These rooms drive buying decisions more than any others. A full kitchen renovation isn't always necessary—sometimes refinishing cabinets, updating hardware, installing new countertops, and adding modern appliances transforms the space for a fraction of the cost of gutting it. The same applies to bathrooms: new vanities, fixtures, flooring, and a fresh look can be achieved without moving plumbing.
Curb appeal sets the first impression. Buyers decide whether they're interested before they step inside. Fresh landscaping, a painted front door, updated house numbers, and clean walkways cost relatively little but signal that the home has been well cared for.
Flooring should be consistent and modern. Luxury vinyl plank (LVP) has become the go-to for flippers—it's durable, waterproof, attractive, and affordable. Removing carpet and installing LVP throughout creates a clean, updated look.
Paint might be the highest-ROI improvement in flipping. Fresh, neutral paint in modern colors makes everything look cleaner and newer. Don't get creative with colors—stick to light grays, warm whites, and greiges that photograph well and appeal to broad audiences.
Always add 15-20% to your renovation budget for unexpected issues. Opening walls frequently reveals outdated wiring, plumbing problems, or water damage that wasn't visible during your initial inspection. These surprises are normal—expecting them keeps you from panicking when they appear.
Common Mistakes New Flippers Make
Underestimating renovation costs is the most common killer of flip profits. New investors often quote materials costs without fully accounting for labor, permits, dumpster rental, or the inevitable scope creep. Get multiple contractor bids before purchasing a property, and pad those numbers.
Overimproving means installing finishes and features that exceed what the neighborhood supports. If you're flipping a starter home in a $275,000 neighborhood, quartz countertops and custom cabinetry won't return their cost. Study your comparable sales carefully and match—don't exceed—the finishes in the highest-priced homes.
Ignoring holding costs can eliminate your profit margin. Every month you own the property, you're paying hard money interest, insurance, property taxes, and utilities. A project that takes six months instead of three might cost an additional $10,000-$15,000 in holding costs alone.
DIY overconfidence burns first-time flippers. Yes, you can watch YouTube videos and do some work yourself. But professional contractors work faster and avoid amateur mistakes that require expensive fixes. Your time also has value—time spent tiling a bathroom is time not spent finding your next deal.
Falling in love with a property clouds judgment. The numbers either work or they don't. Walking away from a property that doesn't meet your criteria isn't failure—it's discipline that protects your capital for better opportunities.
House flipping rewards those who approach it systematically: analyzing deals rigorously, building a reliable team of contractors and professionals, managing projects efficiently, and learning from each project. Your first flip will teach you more than any book or course. Start smaller than you think you should, be conservative in your projections, and build your skills and capital over time.