How To Start Your Own House Flipping Business

How to Start Your Own House Flipping Business in 6 Steps 12/5/19, 2(18 AM
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How to Start Your Own House Flipping

Business in 6 Steps
By Allison Bethell on June 26, 2018 | Business Operations, Flipping Houses, How To, Real Estate Investing |
Comments (20)
Getting started in your own house flipping business involves six steps, the first of which
begins with a solid business plan. The next steps in the process include finding the
right professionals, forming a holding company, obtaining financing and identifying
great properties. The final step is marketing and selling your flips for a profit.
Having a great financing partner is important for anyone starting a house flipping
business. LendingHome can originate fix and flip loans in 15 days or less. Their rates are
competitive and they’ll lend up to 90% LTV and 75% ARV. Prequalifying online takes just
a few minutes.
Visit Lending Home
Here are the six steps on how to start a house flipping business:
1. Create a House Flipping Business Plan

When you’re learning how to buy and flip houses, you need a business plan with
definable goals, strategies, analyses and funding. This house flipping business plan can
https://fitsmallbusiness.com/how-to-start-your-own-house-flipping-business/ Page 1 of 24
help you figure out how many projects you need to complete to achieve your goals. It
also encourages lenders to take you more seriously and puts your profit expectations
and exit strategies on paper.
To help get your business plan on the page and looking great, check out our complete
guide to fix-and-flip business plans. In that article, we walk you through developing an
e"ective business plan for flipping and give you a free template. Download the
template so you can see what a fix-and-flip business plan should include.
Free Downloadable Template
What House Flipping Business Plans Should Include

Because your house flipping business is intended to make a profit, it’s important to
know what to include in your business plan. Investors and lenders read your business
plan, so you want it to be easy to understand and includes information like a goal
summary and lead generation plan.
A good house flipping business plan includes the following six items:
Goal Summary
A house flipping business plan goal summary should include:
Specific goals: Pertaining to flipping houses and how you’ll achieve them
Types of properties: Such as single-family home, duplex and so on
Geographic area: Where you purchase and flip the properties
Who’ll do the work: Contractor or do-it-yourself
Project timeline: 90 days or less
Number of projects: How many you have at one time and during the course of one
year
Expected return on investment (ROI): Aim for 20 percent or more on a typical fix-
and-flip project
Lead Generation Plan
Lead generation is a real estate term for how you’re going to locate properties that you
can fix up and make a profit on. When you’re just starting out, it’s common to use free
resources like Zillow and Realtor.com and have your local real estate agent search for
leads that meet your parameters. Another source is FSBO.com, where motivated sellers
sell their properties without using a real estate agent.
Once your company gets up and running and is turning a profit, it may be time to
implement an actual lead generation plan. These lead generation techniques include
sending out flyers and real estate postcards, putting up signs, or buying leads. Lead
generation takes many forms and helps to make sure you’re never short on potential flip
projects.
Market Analysis
A market analysis includes:
Recent comparables — none older than six months

Demographic data (like from the United States Census Bureau)
Real estate price trends in the area
Any planned upcoming development in the area
Number of days a property is on the market for before it sells
Financing Sources
As part of your business plan, you need to decide if you are relying on cash savings or
using financing sources. If you opt for financing, your carrying costs increase and so
does your timeline. However, financing may enable you to buy and renovate more
properties at once.
It is important to evaluate the trade-o" between the costs of borrowing money and the
leverage it provides you. Lenders charge points and interest and take more time to
close on a property. However, by using them, it frees up your cash for other projects. It
also allows you to purchase projects that you may not have been able to a"ord solely
with cash.
Let’s say a flipper has $100,000 in savings. Imagine that the flipper uses those savings
to purchase and renovate a single home, and then flips it for $125,000. That person just
made $25,000 (25 percent profit) and didn’t have any borrowing costs. Not bad right?
Imagine that same flipper now decides to leverage that $100,000. Instead of paying
cash for a single project, the flipper uses the savings to cover repairs and a small down
payment on multiple properties while financing the rest. He or she does five flips just
like the project described above. Each requires $20,000 savings in down payments and
repairs, but the rest of the purchase is financed.
The costs of financing are about $6,000 per project ($30,000 total), which is more than
the total profit in the example above. However, the profit before financing costs was
$125,000. Even after the cost of financing is factored in, the flipper has made $95,000,
nearly doubling his or her savings. Leverage allowed the flipper to make almost four
times more than what savings alone would have allowed.
If you need financing for any of your fix-and-flip properties, then LendingHome is the
place to go. Before your credit is even run, you are able to input your information and
the property details online, and it gives you potential lending terms with rates starting
as low as 6.99 percent.
Visit LendingHome
Marketing & Sales Plan
The marketing and sales plan covers how to market and sell your rehabbed property,
including if you’re going to hire a real estate agent or sell on your own. Potential lenders
and your partners look at it to see if your exit strategy is in order. Include how you
market the property and what steps you take to sell the property to meet your ROI.
Business & Personal Bios
Business and personal biographies are included in a house flipping business plan to
provide more insight into your qualifications. It also discusses what your business does.
Each bio should consist of one or two well-thought-out paragraphs. It should also
mention if your business is involved in any community service. Your personal bio should
highlight your qualifications, education and industry expertise.
2. Hire the Right House Flipping

Professionals
House flipping professional include attorneys, accountants, real estate agents, and
contractors. You can find them through investor referrals, online searches and reviews
and investment groups.
The right house flipping professionals help you better understand how to get into
house flipping, help prevent mistakes and ensure your business is following legal
guidelines.
Not all of these professionals are needed right away and most of them are hired per
project, instead of as an added payroll expense. If you have already started on a project,
it is fine to hire a general contractor first. If this isn’t the case, then it is recommended
to make an attorney your first hire. A real estate agent can be hired when you start
looking for houses and specialists like an architect only need to be hired when the
project requires it.
Some important house flipping pros you may want to hire include:
Attorney: Choose an attorney that specializes in real estate. He or she draws up
contracts and makes sure your business is in compliance with local ordinances.
Accountant: Help set up your business structure, file taxes for your fix and flip
business, track your expenses and know what items are allowed to be written o".
Real Estate Agent: Gives you accurate market data for the neighborhood you are
flipping in. They have industry knowledge and provide more accurate information
than a real estate website. In most states, they work on commission and are paid
by the seller.
General contractor: Make sure that the GC is licensed in the city you are working
in so he or she can oversee your rehabs. Without a GC, you have to oversee the job
site yourself. This increases your timeline and allows room for errors; both of
which cut into profits.
Landscaper: Hired on an as-needed basis. Without a landscaper, your home may
lack curb appeal, which deters buyers, thus increasing the time your home sits on
the market. This eats into your carrying costs and lowers your ROI.
Architect: They are only needed for larger projects like adding on rooms or
changing the home’s structure. If an architect isn’t used, the structural integrity of
the house could become compromised, which can end up costing you thousands
of dollars.
Handyman: Hired for simpler jobs like painting or patching holes. This person
doesn’t need to be licensed. By using a handyman, you don’t have to spend the
time and e"ort on a DIY project.
Assistant: After you have met with the right professionals and have a few rehab
projects under your belt, you may want to hire an assistant to help with everyday
business activities. An assistant is for the house flipper that is doing five or more
fix and flips per year and is truly running a house flipping business.
When hiring professionals, referrals are your best, most trusted source. If someone you
know has had success with this person, it’s likely that you can as well but it’s never a
guarantee. Friends and family can o"er referrals but the most valuable ones come from
other investors and the investment groups that you join.
Make sure that the professional knows how to do the specific job you are hiring for. This
saves you money in the long run. You don’t want to pay to have the same job done
twice if the first time is done poorly.
3. Set Up Your House Flipping Business

Operations
House flipping business operations include choosing an entity such as an LLC,
registering your business, opening separate bank accounts and getting a business
credit card. You can set these business operations up with the help of professionals like
an attorney and an accountant. These business operations keep your business
organized, e!cient and legal.
House flipping business operations include:
Choose an Entity for Your House Flipping Business

As discussed briefly in Step 2, you and your accountant need to decide what type of
business to set up. You may choose to form a business DBA, S Corporation, LLC or be a
sole proprietor. This is important for tax reasons as well as limiting your liability. If
someone slips and falls at your place of business you don’t want them to be able to sue
you personally, so you want to protect your personal assets separately from your
business.
For more on this topic, check out our guide to starting a real estate holding company.
Register Your House Flipping Business

After you have decided how your business is going to be set up, it’s time to register
your house flipping business with the IRS and get your business an employee
identification number (EIN), which identifies it as a business entity. Also, check with
your state and local municipality for what other business licenses and permits you may
need. These steps need to be followed whether you are running your house flipping
business from home or from an o!ce.
Open a Business Bank Account for Your House

Flipping Business
Once you’ve gotten your EIN number, it’s time to open a business bank account. This
prevents commingling of personal and business money. It’s important from day one
because you are spending money on gas to look for properties. You also need this
separate money to pay your newly hired attorney and accountant. It also helps you to
eliminate auditing from the IRS and complications when your accountant does your
taxes.
To keep your startup expenses low, check out Azlo, a free online business checking
account that’s great for businesses that do not handle cash. Azlo’s mobile app allows
you to deposit checks, make payments, and schedule transfers. Open a free account
online in minutes.
Visit Azlo
Apply for a Credit Card for Your House Flipping

Business
After you have a business bank account, we recommend applying for a business credit
card as well. You can use the business credit card to purchase building materials, buy
o!ce furniture and appliances. They don’t have any upfront points and some of them
o"er advantages like cash back on select purchases or airline mileage points. Their
biggest plus is that they can float expenses for 30 days without paying any interest.
Set Up Marketing Operations for Your House

Flipping Business
After you have followed all of these steps, it’s time to set up some marketing operations
for your house flipping business. Business cards are a good place to start because
they’re inexpensive. You also need a business website and a business email address.
Your website can serve as a portfolio of past projects for investors and lenders and can
help with lead generation by stating the area you work in and the type of properties
you’re interested in. Following this guide of setting up business operations to ensure
your business is legal and is presented in a professional manner.
To help you get started registering your business, contact Rocket Lawyer. It’s an online
legal technology company that can help you with the LLC paperwork, which cuts down
on the time and money it would take to hire an attorney. It o"ers packages that may
cost a few hundred dollars depending on the state you’re in.
Visit Rocket Lawyer
4. Find Financing Sources for Your House

Flipping Business
Assuming that you’re not using all cash, there are typically three ways you can finance
your house flipping business, which are hard money loans, rehab loans and investment
group loans. However, you probably want to use a hard money or rehab loan because
they’re more prevalent and can close quickly.
The three most common ways to finance your house flipping business are:
Hard Money Loans for a House Flipping Business

Hard money loans o"er faster approval times and faster funding times than traditional
mortgages. You can apply online, and they o"er nationwide loans. Their borrower
qualifications are more lenient than traditional loans, but their loan terms are for shorter
time periods. They also have higher interest rates than traditional loan products.
Check out our directory of hard money lenders for a list of nationwide lenders.
Rehab Loans for a House Flipping Business

Rehab loans include home equity lines of credit (HELOCs), which are equity lines in your
current home. Depending on the lender, they can be used to fix up another project.
HomeStyle renovation mortgages are Fannie Mae products used to purchase and
renovate a home within one loan. They include 15- and 30-year fixed and adjustable
rate mortgages and o"er competitive interest rates.
Investment Group Loans for a House Flipping

Business
After you join an investment group, you may meet investors willing to put up some cash
for your deals. This is especially likely if you have experience in construction or in real
estate. These groups are local and can be found via a Google search or on a meetup
group for real estate investors.
If you know that you want to use some form of financing, but aren’t sure where to look,
check out LendingHome. It o"ers loans specifically for fix-and-flip properties with
competitive rates starting for prime borrowers. It funds up to 90 percent LTV and 75
percent ARV. Get prequalified online today.
Visit Lending Home
5. Identify the Right Properties to Fix and

Flip
Once you have a business plan, a fix-and-flip team, operations set up and financing in
place, it’s time to start identifying the right properties to fix and flip for a profit. Keep
your budget and timeline in mind and remember that no matter how good your
business plan is, you still need to identify the right property to meet your ROI. The
neighborhood should be your main focus because you can change the property but not
the neighborhood.
The following are the most important factors in identifying houses right for real estate
flipping:
Neighborhood location: Choose a neighborhood that is convenient to where you

live and work because you may have to make multiple site visits
Well-kept neighborhood: You can change the curb appeal of your house but not
of the neighborhood
Nearby amenities: Attract buyers to your home and encourage them to pay a
higher price and can include parks, library, schools, restaurants and shopping.
Market statistics: Comparables and how long the properties have been sitting on
the market
Homes without structural issues: Avoid issues around the foundation like sinking
floors to avoid time and money spent fixing them, which may also include extra
permits
Value-add repairs: Add the most value to your fix-and-flip projects like large
closets, open floor plans, renovated kitchens and updated bathrooms
Property size: Focus less on the floor plan and more on size; you can remove non-
load-bearing walls to open up rooms, but it’s expensive to add square footage to a
house
Outdoor space: Look for properties with some type of outdoor space that buyers
want to see; you can add curb appeal, but you can’t add a yard if there isn’t
available space
6. Buy, Rehab, Market & Sell Properties

You’re now ready to buy, rehab, market and sell properties for a profit. Generally, it takes
15 to 30 days to close on a property using all cash or a hard money loan. Then, it may
take about 30 to 120 days to rehab the property, depending on its condition. You should
start marketing the property when the rehab is complete enough to take photos. The
property may sell in a few days or take months, depending on pricing and the local
market.
Most house flippers start with free online sites and real estate agents to buy, market
and sell their property. A real estate agent is able to assist you with finding a house to
buy, negotiating the sales price and helping you sell the house once it’s rehabbed.
Other ways to find properties to buy include bandit signs and yellow letters.
Now that you know how to find the property, you just need to rehab it, which is where
your house flipping professionals can help. Your general contractor rehabs the property,
and it is important to work with him or her to stick to a timeline because every day that
you haven’t sold the property is another day of paying carrying costs. The faster you
complete the renovation, the faster you can market and sell the property, which means
hopefully making a profit and keep property flipping.
Mistakes to Avoid When Starting Your Own

House Flipping Business
Like with any business, there are some inevitable mistakes you make when you’re
learning how to start a house flipping business. However, the more mistakes you can
avoid, the more money you can make so your ROI is higher. The less time you have to
deal with correcting the mistakes, the shorter your timeline can be.
Some mistakes to avoid when getting started flipping houses include:
Doing work yourself that you’re not qualified for like plumbing or electrical work
Overspending on renovations; remember that you’re not going to live at the
property
Buying a property that is more than an hour from where you live because it is
inconvenient every time you need to meet a contractor at the property
“One mistake is thinking that you can do it all

yourself. Having a great team to support you
is essential. Most people do not possess the
skills of a real estate agent, home inspector,
lender, contractor and stager. Surround
yourself with an experienced team that has a
proven track record doing the type of flips that
you’re interested in and you have a better chance of being successful.”
— Tom Dewell, President, Commercial Bath Refinishing
“Another mistake is not understanding the

numbers or accounting for the unexpected.
Deals can go into the negative fast especially
in a hot market where there isn’t a huge profit
margin. For example, drastic change orders on
the scope of work, labor shortages, holding
costs due to the property not selling as fast as
expected, and so on.”
— Aisha J. Thomas, Principal, The Thomas Agency, LLC
Frequently Asked Questions (FAQs)

Can You Flip Houses With No Money?
Generally, there are three ways to flip houses with no money. You can wholesale the
property, finance the property with a lender that doesn’t require a down payment or
work with an investor that funds the purchase in exchange for some of the equity.
For more specific information related to flipping houses with no money, read our in-
depth guide to three ways to flip houses with no money down.
How Much Money Can You Make From Flipping

Houses?
One of the reasons investors want to know how to start a house flipping business is so
they can make money. How much money you can make from flipping houses has many
variables. The amount of money you can make depends on your budget, timeline,
geographic location and how much the labor and materials cost. Generally, a good rule
of thumb is that you should make a 20 percent or higher ROI on each house flip.
Check out these pro tips for maximizing ROI on fix-and-flip investments.
What is the 70 Rule in House Flipping?

The 70 rule in house flipping is considered a barometer for many house flippers.
Generally, you shouldn’t pay more than 70 percent of a property’s ARV plus repair costs.
For example, if a property’s ARV is $80,000 and your estimated repairs are $20,000,
you should pay no more than 70 percent of $100,000, which is $70,000.
How Much Money Do You Need to Flip a House?

How much money you need to flip a house depends on the acquisition cost, rehab
costs, carrying costs and marketing and sales costs. The total cost to flip a house is
generally equal to around 10 percent of the property’s purchase price. The costs vary
based on where the home is located, property type and the extent of the renovations
needed. Keep in mind that by learning how to start a house flipping business, you know
the steps to follow and can save money along the way.
See our in-depth guide on how much it costs to flip a house for more information on
the expenses involved in house flipping.
The Bottom Line

After learning how to get started flipping houses, the next step is confirming it o"ers
the best returns on your investments of time and money. After following our step-by-
step guide on how to start a house flipping business, you can create a business plan
and hire the right professionals. You can also set up the business operations, find
financing sources, identify the right properties to fix and flip and learn how to market
and sell the fixed-up properties.
Having a great financing partner is important for anyone starting a house flipping
business. LendingHome can originate fix-and-flip loans in 15 days or less. Its rates are
competitive, and it’ll lend up to 90 percent LTV and 75 percent ARV. Prequalifying online
takes just a few minutes.
Visit Lending Home
About the Author
Allison Bethell
Allison Bethell specializes in Real Estate Investment. Allison has fixed

and flipped over 100 properties, including residential and commercial
properties. She is a licensed real estate broker in Florida. She
graduated from Villanova University with a B.A. in Business and
Sociology. When Allison isn’t involved in real estate or writing, she
loves to travel and has been to all 7 continents. She resides in the
Miami Beach area with her husband and dog.
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How to Start Your Own House Flipping Business in 6 Steps 12/5/19, 2(18 AM

How to Start Your Own House Flipping

Visit Lending Home

1. Create a House Flipping Business Plan

Free Downloadable Template

What House Flipping Business Plans Should Include

A house flipping business plan goal summary should include:

Lead Generation Plan

A market analysis includes:

Recent comparables — none older than six months

Marketing & Sales Plan

Business & Personal Bios

2. Hire the Right House Flipping

Attorney: Choose an attorney that specializes in real estate. He or she draws up

3. Set Up Your House Flipping Business

House flipping business operations include:

Choose an Entity for Your House Flipping Business

Register Your House Flipping Business

Open a Business Bank Account for Your House

Apply for a Credit Card for Your House Flipping

Set Up Marketing Operations for Your House

Visit Rocket Lawyer

4. Find Financing Sources for Your House

they’re more prevalent and can close quickly.

Hard Money Loans for a House Flipping Business

Rehab Loans for a House Flipping Business

Investment Group Loans for a House Flipping

Visit Lending Home

5. Identify the Right Properties to Fix and

Neighborhood location: Choose a neighborhood that is convenient to where you

6. Buy, Rehab, Market & Sell Properties

Mistakes to Avoid When Starting Your Own

Some mistakes to avoid when getting started flipping houses include:

“One mistake is thinking that you can do it all

— Tom Dewell, President, Commercial Bath Refinishing

“Another mistake is not understanding the

— Aisha J. Thomas, Principal, The Thomas Agency, LLC

Frequently Asked Questions (FAQs)

How Much Money Can You Make From Flipping

What is the 70 Rule in House Flipping?

How Much Money Do You Need to Flip a House?

The Bottom Line

Visit Lending Home

About the Author

Allison Bethell specializes in Real Estate Investment. Allison has fixed

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