Last Updated: February 2026

House flipping (also called house-flipping or fix and flip) involves purchasing undervalued properties, renovating them strategically, and selling for profit. Successful flippers routinely earn $30,000-$100,000+ per project, with some generating well over six figures on larger deals. But flipping isn't without risk—poor analysis, renovation mishaps, or real estate market shifts can turn potential profits into devastating losses, and you can lose money if you're not careful.

This comprehensive guide teaches you everything you need to know about how to flip a house: finding the right property, analyzing profits, financing flips, managing renovations, and selling for maximum returns. Learn how to flip houses with no money using creative financing, and discover ways to flip houses successfully. Whether you're flipping your first house or refining your approach, this guide provides the strategies successful flippers use every day in the flipping process.

What Is House Flipping?

House flipping is an active real estate investment strategy where you purchase properties below market value, renovate them to increase value, and sell quickly for profit. Unlike buy-and-hold investing, flipping focuses on creating immediate equity rather than long-term cash flow.

The Basic Flip Formula

Profit = Sale Price - (Purchase Price + Renovation Costs + Holding Costs + Selling Costs)

Example flip breakdown:

• Purchase price: $150,000
• Renovation costs: $45,000
• Holding costs (3 months): $6,000
• Selling costs (agent fees, closing): $18,000
• Total investment: $219,000
• Sale price: $275,000
• Gross profit: $56,000

Types of Flips

Cosmetic flips: Properties needing mostly surface-level updates—paint, flooring, fixtures, landscaping. Lower risk, lower profit potential, faster turnaround.

Renovation flips: Major renovations including kitchen/bath remodels, layout changes, or system updates. Higher potential returns but more risk and capital required.

Gut rehabs: Complete teardowns to studs. Highest profit potential but requires significant experience, capital, and risk tolerance.

Wholesale flips: Technically not flipping—you assign contracts to other investors without ever purchasing or renovating. Lower profit per deal but minimal capital required.

The 70% Rule: Calculating Maximum Purchase Price

Successful flippers use the 70% rule as a fundamental guideline:

Maximum Purchase Price = (ARV × 70%) - Repair Costs

Where ARV (After Repair Value) is the projected sale price after renovations.

Why 70%?

The 30% margin accounts for:

• Holding costs (mortgage, taxes, insurance, utilities)
• Selling costs (agent commissions, closing costs)
• Profit margin (your compensation for risk and effort)
• Contingency for unexpected costs

70% Rule Example

Finding your maximum purchase price:

• ARV (based on comparable sales): $350,000
• 70% of ARV: $245,000
• Estimated repairs: $55,000
• Maximum purchase price: $190,000

When to Adjust the 70% Rule

Use 65% in: Expensive markets, longer renovation timelines, uncertain markets, or your first few flips.

Use 75% when: You have contractor discounts, very fast turnarounds, or hot seller's markets where properties move quickly.

Finding Houses to Flip

The profit in a flip is made at purchase. Finding undervalued properties is the most critical skill.

On-Market Sources

MLS (through an agent): Fixer-uppers, estate sales, and overpriced listings that eventually reduce. Work with an investor-friendly agent who understands your criteria.

Foreclosures and REOs: Bank-owned properties often sell below market value. Learn the full process in our guide on how to buy a foreclosed home. Sources include:

• HUD Homes (hudhomestore.gov)
• Fannie Mae HomePath
• Bank foreclosure listings
• Sheriff's sales

Auctions: Courthouse steps and online auction platforms (Auction.com, Hubzu). Require cash or proof of funds, limited inspection access, and quick closing.

Off-Market Sources (Where the Best Deals Are)

Direct mail: Send letters or postcards to motivated seller categories:

• Absentee owners (landlords living out of state)
• Inherited properties (probate and estate lists)
• High-equity homeowners (owned 15+ years)
• Pre-foreclosure lists
• Tax-delinquent properties
• Code violation lists

Driving for dollars: Drive neighborhoods looking for distressed properties—overgrown lawns, peeling paint, boarded windows, accumulated mail. Research owners and contact directly.

Wholesalers: Investors who find deals and assign contracts. Build relationships with local wholesalers; they bring you deals, you close them.

Networking: Real estate investor meetups, local REI clubs, BiggerPockets forums. Deals come from relationships.

Online marketing: Google Ads, Facebook ads, motivated seller websites. Requires budget and marketing knowledge.

Evaluating Potential Flips

For each potential property, quickly assess:

1. Location: Is the neighborhood desirable? School ratings? Crime?
2. ARV potential: What are comparable properties selling for?
3. Renovation scope: Cosmetic or structural? Can you handle it?
4. Quick math: Does it pass the 70% rule?
5. Market conditions: How fast are homes selling in this area?

Financing House Flips

Unlike rental properties, flips require short-term financing designed for quick turnarounds:

Cash (Best Option)

Paying cash provides significant advantages:

• Fastest closes (can close in days)
• Strongest offers (sellers prefer cash buyers)
• No interest payments eating into profits
• Maximum flexibility

If you don't have cash, consider partnering with someone who does.

Hard Money Loans

Asset-based loans from private lenders, designed for flips:

• Loan amounts: 65-75% of ARV or 80-90% of purchase + rehab
• Interest rates: 8-15%+
• Points: 1-3 points (% of loan amount) upfront
• Terms: 6-18 months
• Approval: Days, not weeks
• Based on: Property value and deal quality, not primarily your credit

Hard money is expensive but enables flipping without massive capital.

Private Money (Private Money Lenders)

Loans from individuals—family, friends, or private money lenders—offer another way to flip houses without using your own money:

• Negotiate your own terms with private money lenders
• Often more flexible than hard money for flipping homes
• May accept lower returns than hard money lenders
• Relationship-based lending—key for flipping a home

Home Equity (HELOC or Cash-Out Refi)

Use equity in your primary residence or other properties:

• Lower interest rates than hard money
• Flexible draw schedule
• Risk: Your home is collateral

Business Lines of Credit

Unsecured lines from banks based on business credit:

• Rates vary widely
• Revolving—use and repay repeatedly
• Requires established business credit

Typical Deal Structure Example

• Purchase price: $150,000
• Renovation budget: $50,000
• Total project cost: $200,000
• Hard money at 85% of costs: $170,000 loan
• Your cash required: $30,000 + closing costs

Estimating Renovation Costs

Accurate repair estimates make or break flips. Underestimating costs is the #1 cause of failed flips.

Getting Accurate Estimates

1. Walk the property thoroughly: Inspect every room, system, and exterior
2. Create a detailed scope of work: List every repair needed
3. Get multiple contractor bids: At least 2-3 for major work
4. Add contingency: Always add 15-20% for unexpected issues

Typical Renovation Cost Ranges

These are rough estimates—actual costs vary by market and scope:

High-ROI Renovations for Flips

Focus renovation dollars where they provide the highest return:

Highest ROI improvements:

• Curb appeal: First impressions matter most (landscaping, exterior paint, new entry door)
• Kitchen updates: New counters, cabinets, appliances, backsplash
• Bathroom remodels: Buyers scrutinize bathrooms heavily
• Fresh paint: Neutral colors throughout (gray, greige, white)
• New flooring: LVP (luxury vinyl plank) offers best value
• Updated lighting: Modern fixtures transform spaces cheaply

Avoid over-improving: Don't add features that exceed neighborhood standards. The most expensive house on the block is hardest to sell.

Managing the Renovation Process

Renovation management determines whether you hit your timeline and budget or blow both.

Finding Reliable Contractors

Sources for contractors:

• Referrals from other investors (best source)
• Referrals from real estate agents
• Home Depot/Lowe's referral programs
• Online reviews (with caution)
• Contractor matching services

Vetting contractors:

• Check license and insurance (verify, don't trust)
• Request and call references
• Visit current job sites if possible
• Start with a small project before large ones
• Get detailed written bids, not ballpark estimates

Creating a Scope of Work

A detailed scope of work prevents disputes and keeps projects on track:

• List every task with specific materials and finishes
• Include allowances for selections (fixtures, appliances)
• Specify quality standards expected
• Define timeline with milestones
• Outline payment schedule tied to completion milestones

Renovation Timeline Management

Time is money—every extra week costs holding costs:

• Create a realistic project schedule
• Order materials before work begins
• Coordinate trades to minimize gaps
• Visit the property regularly (at least every other day)
• Address issues immediately, not later
• Have backup contractors for critical trades

Payment Best Practices

• Never pay more than 10% upfront (for materials)
• Tie payments to completed milestones
• Hold final payment until 100% complete
• Get lien waivers with each payment
• Pay with checks or digital payments (paper trail)

Selling Your Flip: How to Sell the House

Even a perfectly renovated flip fails if it doesn't sell the house quickly at the right price. The best way to flip houses is to plan your exit from day one. Learn how to flip houses successfully by mastering both renovation and sales.

Preparing for Sale

Final punch list: Walk the property as a buyer would. Fix every detail—buyers notice small imperfections.

Deep cleaning: Professional cleaning inside and out. Windows, appliances, grout, everything spotless.

Staging: Staged homes sell faster and for more. Options:

• Full professional staging ($2,000-$5,000+)
• Virtual staging for photos ($100-$300)
• Minimal staging (key pieces only)

Professional photography: Non-negotiable. Photos determine whether buyers schedule showings. Budget $200-$500 for professional shots.

Pricing Strategy

Price aggressively: In flipping, you want to sell quickly. Consider pricing 3-5% below comparable listings to generate multiple offers and a quick sale.

Analyze competition: What's currently on the market? How does your property compare? Price based on current listings, not closed sales from months ago.

Consider market conditions: In hot markets, price at comparables. In slow markets, price below to attract buyers.

Working with a Listing Agent

A skilled listing agent maximizes your sale price and speed:

• Accurate pricing based on current market
• Professional marketing and MLS exposure
• Showing coordination
• Negotiation expertise
• Contract to closing management

Look for agents experienced with investor properties who understand your need for speed and efficiency.

Calculating Selling Costs

Factor these into your profit calculations:

• Agent commissions: 5-6% of sale price (negotiable)
• Seller closing costs: 1-3% (title, recording, transfer taxes)
• Buyer credits: Often expected in buyer's markets
• Staging and photography: $500-$5,000
• Holding costs until close: 30-45 days after accepted offer

Tax Implications of Flipping

Understanding taxes prevents unpleasant surprises:

Ordinary Income vs. Capital Gains

House flipping profits are taxed as ordinary income, not capital gains.

Because flipping is an active business, the IRS treats profits as ordinary income subject to:

• Federal income tax at your marginal rate (10-37%)
• Self-employment tax (15.3%)
• State income tax (varies)

On a $50,000 flip profit, you might owe $15,000-$25,000+ in taxes depending on your bracket.

Reducing Tax Liability

Track all expenses: Deduct every legitimate business expense—materials, contractor payments, interest, utilities, travel, tools, marketing.

Business structure: Operating through an S-Corp can reduce self-employment tax on profits above your reasonable salary.

Retirement contributions: SEP-IRA or Solo 401(k) allows significant pre-tax contributions from flip profits.

Hold longer: Properties held over 12 months qualify for long-term capital gains rates—but this changes your strategy from flipping to value-add rentals.

Consult a CPA: Work with an accountant experienced in real estate to minimize taxes legally.

House Flipping Risks and How to Mitigate Them

Every flip carries risk. Understanding and preparing for risks protects your investment:

Financial Risks

Underestimating renovation costs:

• Mitigation: Add 15-20% contingency, get multiple bids, inspect thoroughly before purchase

Overestimating ARV:

• Mitigation: Use conservative comparables, account for market changes, get agent input

Holding too long:

• Mitigation: Build realistic timelines, price to sell quickly, have backup exit strategies (rent if needed)

Market downturn:

• Mitigation: Buy with sufficient margin, have cash reserves, consider rentability as exit strategy

Execution Risks

Contractor issues:

• Mitigation: Vet thoroughly, use detailed contracts, maintain backup contractors, visit regularly

Permit problems:

• Mitigation: Pull all required permits, understand local requirements, budget time for inspections

Hidden damage discovered:

• Mitigation: Thorough pre-purchase inspection, contingency budget, don't over-leverage

Your First Flip: Step-by-Step Checklist

1. Prepare financially
   • Build cash reserves or secure financing
   • Establish relationships with lenders
   • Create realistic budget expectations
2. Build your team
   • Find an investor-friendly real estate agent
   • Connect with contractors for estimates
   • Identify inspector, title company, attorney
3. Choose your market
   • Research neighborhoods with flip potential
   • Understand price ranges and buyer demographics
   • Identify what sells and what buyers want
4. Find and analyze deals
   • Set up deal pipeline (MLS alerts, off-market marketing)
   • Analyze every potential property using 70% rule
   • Make offers on properties that hit your criteria
5. Purchase
   • Complete due diligence (inspection, title)
   • Finalize financing
   • Close on the property
6. Renovate
   • Finalize scope of work and contractor contracts
   • Pull permits as required
   • Manage renovation to timeline and budget
   • Handle inspections and final punch list
7. Sell
   • Stage and photograph
   • List at competitive price
   • Negotiate offers
   • Close and collect proceeds
8. Analyze and repeat
   • Review what went well and what didn't
   • Refine your process
   • Start looking for the next deal

Frequently Asked Questions

Working with a Real Estate Agent on Flips

A skilled real estate agent can make or break your flipping business:

On the buying side:

• Find deals before they hit the broader market
• Provide accurate comparable sales for ARV estimates
• Negotiate purchase prices
• Facilitate quick closings

On the selling side:

• Price accurately for quick sale
• Market effectively to qualified buyers
• Manage showings and open houses
• Negotiate offers to maximize proceeds

Look for agents who work with investors, understand your timeline needs, and can provide realistic market assessments. Many successful flippers build long-term relationships with 1-2 trusted agents.

Frequently Asked Questions

The Bottom Line

House flipping can be highly profitable when done right—but it requires education, capital, careful analysis, and execution. The profits are made at purchase (buying right), protected through renovation (staying on budget), and realized at sale (pricing to move).

Key takeaways:

• Use the 70% rule: Never pay more than (ARV × 70%) - repairs
• Know your numbers: Conservative estimates beat optimistic projections
• Build contingency: Add 15-20% buffer for unexpected costs
• Move fast: Time is money in flipping
• Build your team: Agent, contractors, lenders—all critical
• Start small: First flip should be conservative, not a home run attempt

Every successful house flipper started with their first project. Start conservatively, learn from experience, and refine your approach with each flip.