House Flipping
Buy distressed properties, renovate them, and sell for profit. Learn how to analyze flip deals and avoid costly mistakes.
What is House Flipping?
House flipping involves purchasing properties below market value, making improvements, and selling them for a profit. Unlike buy-and-hold investing, flipping focuses on short-term gains through forced appreciation.
The 70% Rule
Maximum Offer = (ARV × 70%) - Repair Costs
This rule helps ensure you leave enough margin for profit, holding costs, and unexpected expenses.
Key Numbers to Calculate
- After Repair Value (ARV) — What you can sell the property for after renovation
- Repair Costs — All renovation and improvement expenses
- Holding Costs — Mortgage, taxes, insurance, utilities during the flip
- Closing Costs — Buying and selling transaction costs (typically 3% + 8%)
- Profit — What remains after all expenses
Common Flipping Mistakes
- Underestimating repair costs (always add 10-20% contingency)
- Overestimating ARV based on wishful thinking
- Ignoring holding costs which add up quickly
- Over-improving for the neighborhood
- Not having an exit strategy if the flip takes longer than expected
When Flipping Works Best
Flipping works best in appreciating markets with strong buyer demand. Success requires accurate cost estimation, reliable contractors, and the ability to move quickly on deals.