How to Flip a House

Step-by-step guide to flipping a house

Flipping a house refers to purchasing a property, usually a home in poor condition, to renovate or remodel it and then sell it at a higher price. The goal is to make the best profit possible while only holding on to the home for a few months or less.

If you’re ready to try home flipping for yourself, here are the five basic steps you need to follow. It’s always a good idea to get tips from others who have flipped a property before or are in the real estate field.

Step 1: Research the market

Begin by thoroughly researching the real estate market in your target area. Smart research helps you find profitable opportunities and avoid costly mistakes.

Here’s how to analyze the market effectively:

• Study local market data: Look at recent sales, average days on market and pricing trends. Use real estate websites and local Multiple Listing Service (MLS) data to see whether home values are rising or slowing down.
• Spot up-and-coming neighborhoods: Focus on areas with new businesses, infrastructure projects or improving schools. These often signal future growth and higher resale values.
• Understand buyer demand: Identify which home styles, sizes and features are most popular in your area. Target properties that match local preferences to make your flip more appealing.
• Watch design and decor trends: Choose updates that appeal to today’s buyers, such as neutral colors, energy-efficient appliances and open layouts, rather than overly trendy styles that may date quickly.

Doing your homework before you buy gives you a clear picture of where to invest and what upgrades will deliver the best return.

Step 2: Find the right home

Once you’ve researched the market, focus on finding a property with strong profit potential and manageable repair costs. The best flips are homes you can improve efficiently without running into expensive surprises.

“When diving into house flipping, it's crucial to identify potential risks. Look for red flags like foundation problems, extensive mold and outdated electrical systems,” said Gagan Saini, founder and director of acquisitions at JiT Home Buyers.

Here’s how to choose the right home to flip:

• Search for undervalued properties: Focus on distressed homes, foreclosures, short sales or estate sales that are priced below market and have the potential for value appreciation.
• Assess repair needs carefully: Bring a contractor or home inspector to estimate renovation costs before you buy. Avoid properties with serious structural issues or systems that need complete replacement.
• Watch for hidden red flags: Foundation cracks, water damage, mold or pest infestations can quickly turn a profitable flip into a money pit.
• Use your network: Connect with local real estate agents, contractors and wholesalers to find off-market deals or properties before they’re widely listed.

A thorough inspection and smart due diligence will help you find a home that’s worth the effort and set you up for a successful flip.

Step 3: Estimate repair costs

Estimating repair costs accurately is crucial for a successful house flip. It’s essential to thoroughly evaluate the property and create a detailed scope of work. Get multiple quotes from contractors or use cost estimation tools to gauge the expenses involved in repairs, renovations and upgrades.

Then, add up your estimated purchase price, repair costs, taxes and closing expenses. Don’t pay more than 70% of a property’s after-repair value (ARV) minus the estimated renovation costs. This helps maintain a safe profit margin.

It’s wise to add a buffer of 10% to 15% for unforeseen expenses or contingencies to ensure you have a realistic budget. If you know which contractors you will use, they can walk through it with you on potential listings and help you calculate estimates.

Step 4: Plan renovations and manage contractors

Once your budget is set, create a clear renovation plan and establish a system to manage your contractors. Even if you’re pretty handy around renovations, you’ll still need a team of trusted tradespersons to help you finish your home on time.

Look for licensed professionals who have worked on similar flipping projects and know how to work effectively with local building codes and regulations.

• Develop a detailed timeline: Break the project into phases (demolition, structural repairs, systems updates and finishing touches) so you can track progress and coordinate contractor schedules.
• Hire the right team: Check references, verify licenses and interview multiple contractors to ensure quality work and fair pricing.
• Use contracts and agreements: Clearly outline the scope of work, timeline, payment schedule and responsibilities to protect both parties.
• Monitor progress and quality: Visit the site regularly, communicate expectations and address issues promptly to prevent delays or mistakes.
• Keep organized records: Track invoices, receipts and change orders to stay within budget and simplify your resale calculations.

Proper planning and active contractor management ensure renovations are completed on time, within budget and to a high standard.

Step 5: Sell for a profit

The most exciting and nerve-wracking step is putting your newly refinished home back on the market. Consider spending additional funds to stage it since, according to the National Association of Realtors (NAR), 83% of buyers’ agents said that staging a home helps buyers to visualize the property as a future home.

Additionally, you should plan on high-quality photography and videography to enhance your listing. If the house looks better and is priced competitively for the neighborhood, you should get traction from interested buyers.

» MORE: How to choose a home remodeling contractor

How much does it cost to flip a house?

The money needed to flip a house depends on the purchase price, renovation scope and holding costs. Most investors aim to buy a property for 50% to 70% of its after-repair value (ARV). Renovation costs can range from $20,000 to $100,000 or more, depending on the work required.

You should also budget for holding costs like taxes, insurance, utilities and loan interest, plus a contingency fund of 10% to 15% for unexpected expenses. Many flips start with $50,000 to $100,000 in cash or financing, though smaller projects may require less.

Cost analysis mistakes to avoid

Most real estate investors abide by the popular rule of buying low and selling high. This is great advice, but it’s important to do a full cost analysis before purchasing.

“The first big mistake that flippers make is not including all costs involved in the deal,” said Steve Davis, CEO of Total Wealth Academy. “Not only do you have purchase price and rehab costs, you have holding costs, closing costs and commissions when you sell.”

Closing costs typically cost 2% to 5% of the home’s purchase price and can include taxes and insurance. Holding costs are the fees that come when your property does not sell in the time you wish, such as paying an additional month on your loan.

“The second big mistake is over-evaluating the property value. I watch HGTV. They do it wrong every time,” said Davis. “The value of the house should be based off of comparable sales. The average sale price is what you should go with when evaluating single-family real estate. Do not go with the high even though you are making it perfect. Go with the average.”

Calculating the 70% rule

The 70% rule helps estimate the maximum cost of paying for a piece of property to flip. According to this rule, an investor shouldn’t pay more than 70% of the property’s after-repair value (ARV) minus the estimated repair costs:

(Projected ARV of property) x 0.70 - (estimated repair costs) = Maximum purchase price

For example, if the ARV of a property has a projection of $300,000 and the estimated repair costs are $40,000, the maximum purchase price should not exceed $170,000.

How do you pay for a flip house?

Most investors pay cash for flippers. According to the U.S. Home Flipping Report by ATTOM, a real estate data site, buyers purchased 62.6% of homes flipped in the second quarter of 2025 with all cash. While that’s the ideal way to maximize your profit, it isn’t the only choice. Applying for a traditional 15- or 30-year mortgage isn’t the best solution for your short-term property, either.

Instead, a hard money loan is an option for real estate investors and flippers to get financing quicker than a conventional loan. Even though these loans have easier requirements, expect to pay higher interest rates.

» LEARN: How to finance home renovations

Pros and cons of house flipping

House flipping can earn a lot of cash within a short time frame if you find the right property, renovation team and buyer. However, flipping houses can also be financially risky, especially if it’s your first time or you’re buying and selling in uncertain market conditions.

Consider these pros and cons before you buy a house to flip.

Bottom line

House flipping can be rewarding as a side business or a one-time way to earn a profit quickly. Before starting, know that home-flipping reality television shows aren’t as accurate as the producers lead you to believe. Instead, it’s better to do your own research in your local area to discover what the process really looks like and if it’s a good fit for your finances and skills.