Starting a house flipping business is an exciting venture that combines real estate knowledge and renovation skills with sharp business savvy. The market is a multi-billion dollar industry, with steady demand for renovated homes from first-time buyers, growing families, and property investors.
This guide will take you through the practical steps of creating a business plan, securing funding, obtaining the right permits, and building your team to help you launch a successful house flipping business in the U.S.
Step 1: Develop your business plan and research the market
Market and competitor analysis
Start your research on real estate platforms like Zillow and Redfin. Analyze your target neighborhoods to find the price difference between fixer-uppers and renovated homes. A healthy gap is a key indicator of profit potential. You can also access the Multiple Listing Service (MLS) through a real estate agent.
Pay attention to other flippers. Track properties that are bought and quickly relisted after renovations. Public records can also reveal which investors are active in your area. This shows you what kind of finishes and price points succeed with local buyers.
Budgeting your first flip
Your business plan's financial section is critical. Many new flippers miscalculate the total investment. Beyond the property purchase, which varies widely by location, you have several other costs. A detailed budget prevents surprises that can erase your profit.
Here is a sample cost breakdown:
- Renovation: Typically 10-20% of the home’s After Repair Value (ARV).
- Holding Costs: About 5-8% of the total investment for taxes, insurance, and utilities.
- Contingency Fund: Set aside an extra 15% of your renovation budget for unexpected issues.
- Selling Costs: Plan for 8-10% of the sale price to cover agent commissions and closing fees.
Here are 3 immediate steps to take:
- Identify three potential neighborhoods and track recent sales data.
- Create a sample budget for a hypothetical property in one of those areas.
- Contact a real estate agent to discuss getting access to MLS data.
Step 2: Set up your legal structure and get licensed
You might want to consider forming a Limited Liability Company (LLC). This structure separates your business liabilities from your personal assets. Many flippers elect for an S Corp tax status for their LLC, which can help reduce self-employment taxes on profits once your business grows.
You will need a general business license from your city or county. While a real estate license is not required to flip houses, obtaining one can grant you direct MLS access and save you thousands in commissions. Check your state's requirements for this.
Navigating building permits
Any significant renovation requires permits from your local building department. This includes electrical, plumbing, and structural changes. Permit costs can range from $500 to over $2,000 and take two to six weeks for approval. A common mistake is starting work without one, which leads to fines and delays.
Here are 3 immediate steps to take:
- File for an LLC with your state’s Secretary of State office.
- Apply for a general business license through your city or county clerk.
- Contact your local building department for a schedule of permit fees and applications.
Step 3: Secure your insurance and manage risk
Your first call should be for a Builder's Risk policy. This covers the property itself and your materials during renovation. A standard homeowner's policy will not cover a vacant house flip, a mistake that can be financially devastating if something goes wrong.
Next, you need General Liability insurance. This protects you if someone gets injured on your job site. Aim for at least $1 million in coverage, which typically costs between $500 and $1,500 per year.
If you hire direct employees, you will need Workers' Compensation. Also, verify that every subcontractor has their own liability and workers' comp insurance. If they do not, you could be held responsible for accidents.
Look for insurers who understand construction risk. Companies like The Hartford or Hiscox offer policies tailored for flippers. A local insurance broker who specializes in real estate can also be a great resource to find competitive rates.
Here are 3 immediate steps to take:
- Request quotes for a Builder’s Risk policy for a sample property.
- Contact an insurance broker who specializes in real estate development.
- Draft a checklist to verify insurance certificates from all subcontractors.
Step 4: Find your workspace and acquire equipment
Set up your base of operations
Most flippers start with a home office. For materials and tools, a 10x20 foot storage unit is a practical choice. Check local self-storage facilities for monthly rates, which often range from $150 to $300. A climate-controlled unit protects sensitive materials like flooring.
When you rent a storage unit, ask for a month-to-month lease. This gives you flexibility to downsize or end the lease between projects. Many facilities offer a free first month, so always inquire about current promotions to lower your initial outlay.
Assemble your renovation toolkit
A frequent misstep is to buy every high-end tool at once. Instead, acquire quality basics and rent specialized equipment. This preserves your capital for the property itself. Your initial investment in tools could be between $2,000 and $5,000.
Here are some foundational items and their typical costs:
- Miter Saw: $250 - $700
- Airless Paint Sprayer: $300 - $900
- Cordless Drill and Driver Set: $200 - $450
- Demolition Hammer: $100 - $300
- Shop-Vac: $100 - $250
Develop supplier relationships
While big-box stores are convenient, you should also open accounts with local lumber yards and plumbing or electrical supply houses. They often offer better bulk pricing and expert advice. Ask about their delivery options and fees directly to your job site.
At stores like The Home Depot or Lowe's, sign up for their Pro programs. These provide access to volume discounts, dedicated service desks, and purchase tracking, which simplifies your expense management. Minimum orders are rare for standard stock items.
Here are 3 immediate steps to take:
- Get quotes for a 10x20 climate-controlled storage unit in your area.
- Create a starter equipment budget based on the price ranges provided.
- Apply for a contractor account at a local or national home improvement supplier.
Step 5: Organize your finances and payments
Set up your accounting
You need to track every dollar to know your true profit. Consider accounting software like QuickBooks Online or Xero. These platforms let you tag each expense to a specific property address. This makes it easy to see the exact cost and profit for each flip.
A frequent mistake is to mix business and personal spending. Keep them separate from day one. This simplifies tax season and gives you a clear view of your business's financial health, which is vital when you seek more funding for future projects.
Handle payments efficiently
While your main property sale is handled through escrow, you will have smaller transactions. You might sell leftover materials or do small contracting jobs for extra cash flow. For these situations, you need a simple way to accept payment on the spot.
For house flipping businesses that need to accept payments on-site or on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit and digital wallets directly through your smartphone - just tap and done. Other payment solutions often have rates from 2.5% to 3.5%.
At just 1.99% per transaction with no hidden costs or extra hardware needed, it is particularly useful for collecting payment for sold materials or small contracting side-jobs. Here is how to use it:
- Get Started: Download JIM app for iOS.
- Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone.
- Access Funds: Your money is available right on your JIM card as soon as the sale is done - no waiting for bank transfers.
Here are 3 immediate steps to take:
- Sign up for an accounting software trial like QuickBooks or Xero.
- Download the JIM app to see how it works on your phone.
- Create a basic chart of accounts in your software to track flip-specific costs.
Step 6: Secure funding for your first flip
Funding sources for flippers
Hard money loans are a popular choice. Lenders focus on the property's After Repair Value (ARV) instead of just your personal credit. Expect interest rates from 8% to 15% plus 2 to 5 points upfront. A mistake some make is underestimating these initial fees.
Private money from individuals is another route. These terms are negotiable, but you should always formalize the deal. Have a real estate attorney draft a promissory note and mortgage document. This protects both you and your lender and typically costs a few hundred dollars.
Conventional bank loans are less common for distressed properties. They often have strict appraisal requirements that fixer-uppers cannot meet. Similarly, SBA loans are generally not designed for single-family residential flips, but for other business operating needs.
Managing your capital
Beyond the purchase and renovation budget, you need working capital. This covers your holding costs for the project's 3-6 month timeline. For a $300,000 property, this could mean having $9,000 to $15,000 in liquid cash for taxes, insurance, and utilities.
Your contingency fund, about 15% of the renovation budget, is not optional. When you present your project to lenders, including this buffer shows you are prepared. It demonstrates that you understand the real-world risks of renovation and can handle unexpected issues.
Here are 3 immediate steps to take:
- Research three hard money lenders in your state and compare their rates and points.
- Create a one-page summary of a hypothetical flip project to show potential private lenders.
- Calculate the liquid cash reserve you would need for a six-month holding period.
Step 7: Build your team and manage the project
Your core renovation team
You will not hire a full-time staff. Instead, you assemble a project-based team. Your most important relationship is with a General Contractor (GC) who manages the renovation. A good GC typically costs 10-20% of the total renovation budget.
A mistake many new flippers make is hiring the cheapest contractor without checking their background. Always verify their license and insurance. Ask for at least three recent references and call them. This step can save you from major budget overruns.
For individual jobs, you need licensed subcontractors like electricians and plumbers. Your GC often provides a crew, but you can also build your own contact list. Ask for recommendations at local lumber yards and supply houses to find reliable tradespeople.
Keeping the project on track
Clear communication prevents delays. You might want to use a simple project management app like Trello or Asana to create a timeline and track tasks. A detailed Scope of Work (SOW) document is also necessary for every contractor, listing all tasks and payment milestones.
Here are 3 immediate steps to take:
- Ask for general contractor recommendations from two local real estate agents.
- Verify the license status of one potential electrician on your state's licensing board website.
- Create a sample project timeline for a small renovation using a spreadsheet or a free Trello board.
Step 8: Market your flip and find a buyer
Stage the property for broad appeal
Professional staging helps buyers visualize the space as their own. You can expect to invest $2,000 to $5,000 for a full staging. This often results in a 1-5% higher sale price and can reduce the time your property sits on the market.
High-quality photos are your most important online asset. A professional real estate photographer typically costs between $200 and $500. A mistake some flippers make is to use their phone for pictures, which fails to attract serious buyers on sites like Zillow.
Set your pricing and listing strategy
Your agent will get your property on the Multiple Listing Service (MLS), which feeds all major real estate websites. The first two weeks generate the most interest, so your price must be competitive from the start. Pricing just below a round number, like $499,000, can also increase visibility.
Host effective showings
For open houses, ensure the home is immaculate. Prepare a one-page feature sheet that lists all the upgrades, new appliances, and warranty information. This document gives buyers tangible proof of the quality of your work and helps justify the asking price.
Here are 3 immediate steps to take:
- Request quotes from two local home staging companies.
- Schedule a real estate photographer for the day renovations are complete.
- Create a feature sheet listing all property upgrades and new systems.
Step 9: Price your flip for maximum profit
A good starting point is the 70% rule. This guideline suggests you should pay no more than 70% of the home's After Repair Value (ARV) minus the cost of repairs. It is a quick filter to see if a deal has potential before you dive deeper.
Calculate your After Repair Value (ARV)
Your ARV is what the house will be worth after renovations. Find this by analyzing "comps" or comparable recently sold properties on the MLS. Look for homes with similar size, age, and condition in the same square mile that sold in the last 90 days.
A frequent error is over-improving a property for its neighborhood. Your goal is to meet the standard of the comps, not to build the most luxurious house on the block. This keeps your renovation budget in check and aligns the home with buyer expectations.
Determine your final list price
With your ARV and total costs known, you can set your price. Aim for a net profit margin of 15-20% of the sale price. For example, if your total investment is $320,000 and you want a 20% profit ($80,000), your target sale price would be $400,000.
Consider pricing psychology. Listing at $399,000 instead of $400,000 can attract more buyers searching within a lower price bracket. Your real estate agent can create a "net sheet" to show your estimated proceeds after all commissions and closing costs are paid.
Here are 3 immediate steps to take:
- Analyze three recently sold comps for a potential property using Zillow or Redfin.
- Calculate a target list price for a hypothetical flip using a 15% profit margin.
- Ask a real estate agent to prepare a sample seller's net sheet for that price.
Step 10: Control quality and scale your business
Establish your quality standards
Your reputation depends on the quality of your work. Create a detailed final punch list for every project. You can use the National Association of Home Builders (NAHB) Residential Construction Performance Guidelines as your benchmark for fit and finish. This gives you a professional standard.
A frequent misstep is to ignore minor cosmetic flaws before listing. Buyers notice these small issues, which can make them question the overall quality of the renovation. Aim for zero defects on your final walkthrough to protect your sale price and brand.
Know when to grow
After one successful flip, it is tempting to scale quickly. A more measured approach is to complete two or three flips with a consistent 15-20% net profit margin. This proves your business model is sound before you take on more risk.
Once you manage more than one project at a time, you might want to hire a project manager. For managing multiple timelines and budgets, you can look into construction management software. Platforms like Buildertrend or CoConstruct help organize schedules and financials across several job sites.
Here are 3 immediate steps to take:
- Download a sample punch list template to customize for your projects.
- Set a specific profit goal for your first three flips to use as a scaling benchmark.
- Explore the features of a construction management software like Buildertrend or CoConstruct.
You now have a clear path to launch your house flipping business. Success often comes down to the details, from your first budget to the final punch list. With a solid plan, you are ready to turn your first property into profit.
And for those smaller transactions, like selling leftover materials, a simple payment solution is useful. JIM lets you accept cards right on your smartphone for a flat 1.99% fee, no hardware needed. Download JIM to handle payments on the go.
