Are you interested in learning how to start flipping houses? Property flipping, house flipping, or “fix-and-flips” can be a lucrative way to earn money in North Carolina real estate—if it’s done right. According to The Motley Fool, the average return on investment for house flipping in the U.S. in the second quarter of 2024 was 30.4%, and the average gross profit was $73,492.
House flipping involves purchasing properties at a lower cost, renovating them, and selling them for a profit. Successful house flipping requires a combination of market knowledge, budgeting skills, and renovation expertise. By understanding the process and being prepared for potential challenges, investors can turn undervalued properties into desirable homes that command competitive market prices.
The house-flipping process generally follows these key steps:
- Researching the market: Analyze market trends, housing demand, and property values to identify areas with strong profit potential.
- Setting a budget and securing financing: Establish a realistic budget covering purchase, renovation, and holding costs and secure funding for your project.
- Finding the right property: Search for undervalued properties with potential.
- Creating a renovation plan: Outline the renovations required to maximize the property’s appeal and profitability, including cosmetic upgrades and structural improvements.
- Executing the renovation: Manage contractors, timelines, and budgets to ensure the project stays on track.
- Marketing and selling the flipped house: Stage the property, set a competitive price, and leverage marketing strategies to attract buyers and close the sale quickly.
Because of reality TV, virtually everyone thinks they have what it takes to flip houses, but the reality is—it takes skill and knowledge. The good news is that practice makes perfect when working on home renovations. You can also learn strategies for selecting the right property to flip by taking real estate courses. If you want to become a house flipper in North Carolina (or anywhere else), read through our six steps to starting a property flipping business.
Key Takeaways
- Understanding market trends, housing demand, and property values is essential for identifying areas with strong profit potential. Tools like MLS, public records, and online platforms can help locate undervalued properties.
- A detailed budget should include purchase, renovation, and holding costs. Various financing options, such as hard money loans, private lenders, and traditional mortgages, cater to different flipping strategies.
- Plan renovations strategically to maximize ROI, focusing on necessary repairs and high-impact upgrades. Manage contractors effectively and allocate 10-15% of the renovation budget for unexpected costs.
- Proper staging, competitive pricing, and targeted marketing strategies, including professional photography and social media ads, ensure the flipped property attracts buyers quickly and sells profitably.
6 Steps to Get Started as a Property Flipper
Want to get started in house flipping? Here are the steps you need to take to make money as a house flipper in NC.
Step 1: Researching the market
Market research is the foundation of any successful house-flipping project. Understanding the local real estate market helps you identify areas with strong demand and high resale potential. Thorough research minimizes risks, allowing you to focus on neighborhoods with growth potential, a stable economy, and buyer interest. ‘
Tools for Identifying Profitable Areas for House Flipping
Several tools and resources can help you pinpoint areas with house-flipping potential:
- Real estate platforms: Websites like Zillow, Redfin, and Realtor.com provide data on property values, trends, and sales history.
- MLS (Multiple Listing Service): The Multiple Listing Service (MLS) is your best friend when buying and selling homes. It’s the place to go for accurate information on for-sale properties. Unlike some online listing sites, the MLS data “is accurate and verifiable,” says Bill Gallagher, a Charlotte, NC, real estate broker who’s taught pre and post-licensing courses for 25 years. “Other sites aren’t reliable 100% of the time. You always have to go back to the MLS.” Here’s the catch: You have to be a real estate broker and a member of a national, state, and local real estate association to gain access to the MLS. If you’re not a broker, you’ll have to pay—sometimes as much as $1,000—to list your property on the service. If you flip several properties, those fees can add up, giving you a good reason to earn your real estate license prior to flipping houses.
- Public records: County property records can reveal foreclosure opportunities or properties with untapped potential.
- Social media and community forums: Local Facebook groups or real estate forums may highlight upcoming developments or hot spots in your target market.
- Drive and observe: Touring neighborhoods in person can reveal details like curb appeal, property conditions, and proximity to amenities.
Combining these tools allows you to evaluate locations effectively, ensuring your investments align with buyer demand and market trends.
Step 2: Setting a budget and securing financing
Creating a realistic budget is crucial for a successful house flip.
Start by estimating the total cost of purchasing the property, including the down payment, closing costs, and any initial fees. Next, allocate funds for renovations, prioritizing necessary repairs and upgrades that add the most value. Don’t forget to account for holding costs, such as property taxes, insurance, utilities, and loan interest, which accrue while the property is being renovated and marketed.
Include a contingency fund for unexpected expenses, such as structural issues or permit delays.
A well-planned budget ensures you stay financially prepared and avoid overspending, which can erode your profits.
Financing Options for House Flipping
House flippers have several financing options, depending on their financial situation and project goals. However, keep in mind the risk associated with borrowing money.
- Traditional mortgages: A traditional mortgage may be suitable for a fix and flip in some situations. Consider a traditional mortgage if the property is in good condition and doesn’t require significant repairs to qualify for the loan. You may also consider a traditional mortgage if you plan to hold the property longer, such as renting it out before selling.
- Hard money loans: These short-term loans offer fast funding with higher interest rates.
- Private lenders: Individuals or groups may be willing to invest in your project in exchange for a return on their money.
- Home equity loans or lines of credit (HELOCs): HELOC programs are accessible to flippers with equity in an existing property.
- Cash purchases: To reduce risk, consider cash purchases for your fix-and-flip. Cash purchases allow you to close quickly and are beneficial for properties that may receive many offers.
Choosing the right financing method depends on your timeline, creditworthiness, and access to capital.
Calculating ARV and Potential Profit
After-Repair Value (ARV) is a critical metric in house flipping. It represents the property’s estimated value after renovations. To determine a property’s ARV, compare recently sold properties in the same neighborhood with similar sizes, features, and upgrades.
Once you know the ARV, use this formula to estimate your potential profit:
Potential Profit = ARV – (Purchase Price + Renovation Costs + Holding Costs + Selling Costs)
By accurately calculating ARV and potential profit, you can make informed decisions about which properties to pursue, ensuring your investment aligns with your financial goals.
Step 3: Finding the right property
Identifying undervalued properties is a cornerstone of successful house flipping.
Look for foreclosures and short sales. Bank-owned properties and short sales often sell below market value, offering a chance to maximize profit.
Also, consider monitoring auctions. Property auctions can be a great source of deals, though they may require fast decision-making and cash payments.
Some people have found properties by directly contacting homeowners in desired locations, especially those with distressed or vacant homes.
By employing these methods, you can uncover properties with high potential for improvement and profitability.
Red Flags When Buying a Property
Not every deal is a good one. Watch out for these red flags when evaluating a potential property:
- Structural issues: Major foundation cracks, significant water damage, or roof problems can lead to costly repairs.
- Location challenges: Properties in declining neighborhoods or near industrial zones may struggle to attract buyers.
- Title problems: Unresolved liens or unclear ownership can delay your project and increase legal expenses.
- Unrealistic seller expectations: If the seller is unwilling to negotiate or price the property fairly, it may not be a worthwhile investment.
- Excessive renovation needs: A property requiring extensive or specialized repairs might exceed your budget and timeline.
Conducting thorough due diligence can help you avoid costly mistakes and ensure that you invest in a property with true potential.
Step 4: Creating a renovation plan
Next up, it’s time to renovate! A well-thought-out renovation plan begins with a detailed assessment of the property’s condition. Identify essential repairs critical to functionality and safety, such as fixing structural issues, addressing plumbing or electrical problems, and ensuring the property meets local codes. Then, focus on cosmetic upgrades that enhance the property’s appeal, such as modernizing kitchens and bathrooms, painting, and improving curb appeal. Prioritize renovations that deliver the highest return on investment by analyzing what buyers in the area value most.
When renovating, it’s essential to stay on budget so you’ll make money on your house when you sell it. Here are some tips.
- Create a budget.
- Reuse materials or buy used, salvaged materials from other house flippers.
- Stick to classic designs that will resell well.
- Be specific with your initial budget so you’ll have an accurate estimate from the start.
- Decide where you’ll splurge and where you’ll stick with the minimum.
Hiring and Managing Contractors
You may be skilled enough to complete the renovations yourself. However, for many investors, reliable contractors are key to executing a successful renovation. Start by obtaining multiple quotes to compare pricing, timelines, and experience. Check references and ensure contractors are licensed, insured, and familiar with local building codes. Clearly outline the scope of work in a written contract, including deadlines, payment terms, and expectations.
Effective management is equally important—maintain regular communication, conduct progress inspections, and address issues promptly. Building strong relationships with contractors can result in smoother projects and better outcomes.
Step 5: Executing the renovation
Proper management is essential to ensure your renovation stays on track. Begin with a clear project timeline. Use project management tools or apps to track milestones, deadlines, and budgets. If you are using outside contractors, conduct regular site visits to inspect the quality of work and verify that it aligns with your plans. Strong management minimizes delays, ensures accountability, and keeps the renovation running smoothly.
Delays and cost overruns can significantly impact profitability. To avoid these pitfalls, create a realistic schedule that accounts for material delivery times, contractor availability, and unforeseen challenges. Update your budget as the project progresses to monitor expenses closely. Address potential delays early and have contingency plans in place to stay adaptable. Regularly reviewing the timeline and budget ensures the project remains efficient and cost-effective.
Step 6: Marketing and selling the flipped house
Staging is a powerful tool for showcasing your flipped house in its best light. Arrange furniture and décor to highlight the property’s strengths, such as spacious layouts or natural lighting. Use neutral colors and minimalistic designs to appeal to a wide range of buyers. Don’t forget to focus on curb appeal—ensure the exterior is clean, landscaped, and inviting.
Pricing the Property
Setting the right price is crucial for attracting buyers while maximizing your profit. Conduct a Comparative Market Analysis (CMA) to evaluate the prices of similar properties in the area. Consider factors like the property’s location, condition, and recent renovations when determining its value. While it’s tempting to aim high, pricing competitively ensures the house doesn’t sit on the market too long, which can increase holding costs. Be strategic and adjust the price if buyer interest is low after the first few weeks.
Marketing Strategies for a Quick Sale
A strong marketing plan ensures your property reaches the right audience. Use these strategies to generate interest:
- Professional photography: High-quality photos make your listing stand out online and attract more potential buyers.
- Online listings: Leverage platforms like Zillow, Realtor.com, and the MLS to maximize visibility.
- Social media: Share your listing on platforms like Facebook and Instagram, using targeted ads to reach local buyers.
- Open houses: Host open houses to allow buyers to experience the property in person.
- Highlight renovations: In your marketing materials, emphasize upgrades and key selling points, such as energy-efficient features or modern finishes,
You can attract buyers quickly by combining effective staging, strategic pricing, and targeted marketing.
Optional step: Get your real estate license
You don’t technically need your real estate license to become a house flipper, but it’s still a good idea.
“Most states have several disclosure forms required by law,” Gallagher said. “The national exam gives flippers confidence that they’ve mastered the material.” That material includes information on disclosure forms, zoning challenges, financing details, and homeowners association regulations, all of which are critical to buying and selling homes.
Having a real estate license will also help you reduce your costs. You’ll always have to pay the buying broker a 2% to 3% commission, but if you get a real estate license as a flipper, you can represent your own property.
Some brokers-in-charge—not all—will let their brokers pay themselves or eliminate the listing commission on sales of broker-owner properties. As of this publication, the median home value for North Carolina was $328,715 (Zillow December 2024). If you act as your own listing broker, you’ll save $4,930 to $9,860, which could be the difference between making a profit, breaking even, or losing money on a flip.
What is the 70% rule in house flipping?
The 70% rule in house flipping is a guideline used by real estate investors to determine the maximum price they should pay for a property. According to this rule, an investor should not pay more than 70% of the property’s After Repair Value (ARV) minus the estimated repair costs.
Maximum Purchase Price = (ARV × 70%) – Repair Costs
Example:
- ARV: $200,000
- Estimated Repairs: $30,000
Maximum Purchase Price = ($200,000 × 70%) – $30,000
Maximum Purchase Price = $140,000 – $30,000 = $110,000
In this example, an investor should pay no more than $110,000 for the property to ensure there is enough margin for a profit after accounting for purchase, renovation, holding, and selling costs.
The 70% rule is not a strict formula but rather a helpful guideline for avoiding overpaying and ensuring profitability in house flipping projects.
No matter how thorough your planning, surprises are inevitable in house flipping. Hidden problems, such as mold, asbestos, or structural damage, can quickly escalate costs. To safeguard your budget, allocate at least 10-15% of your total renovation costs for contingencies. Preparing for the unexpected helps you manage financial risks and keeps the project on track. Staying flexible and proactive ensures unforeseen expenses don’t derail your flipping goals.
Do you need a real estate license to flip houses?
You don’t necessarily need a real estate license to flip houses, but it would be beneficial. Many months pass between identifying and buying a property, fixing it up, and (hopefully) selling it for a profit. House flippers who’ve obtained a real estate license can earn money buying and selling other people’s properties while they’re working on their own. And, since real estate brokers often work nontraditional hours, they can manage a construction site that typically starts at 7 AM and ends at 3 PM and earn commissions on real estate deals during off-hours.
“Everyone thinks that real estate is easy,” Gallagher said. “It’s the opposite. Having knowledge of what can go wrong—all the liability issues—can really help reduce your risk.” So, if you’re interested in becoming a house flipper, consider becoming a licensed real estate broker—it could be the key to your success.
Earn your North Carolina real estate license with the Superior School of Real Estate, a local real estate education provider with their pulse on the market. Get started today!
