How Much Money Can You Make Fix and Flipping Homes?

Article by: InvestFourMore

I have fix and flipped over 100 homes in the last ten years and although it is not easy to flip houses, it is a lot of fun. You can make a lot of money once you have developed a system and learned the business. Fix and flipping is only part of my real estate business; I also have 11 long-term rentals and I am a Realtor. I talk about how much money you can make on rental properties here and how much real estate agents make here, but how much money can you make fix and flipping houses?

How much money can you make on a single fix and flip?

How much money you make on a fix and flip varies with each deal and how much the house is worth. I have lost $10,000 on a flip and made up to $100,000 on a fix and flip. My goal on each fix and flip is to make at least $25,000 in profit. I have hit some home runs and had some huge mishaps when fix and flipping. There is a lot of risk involved when you fix and flip a home and if I don’t have at least $25,000 in profit potential, I usually will not make the deal. The more expensive a house is the more money I hope to make, because the risks and costs increase.

Here is an article that describes how to make more money fix and flipping homes.

The more expensive a fix and flip, the more money you should make

When fixing and flipping more expensive houses, you should make more money than the less expensive flips. The more expensive a house, the more interest, more repairs, more holding costs and more commissions you pay. For the increased risk on a more expensive house, you need to be rewarded with a bigger profit.

It also takes more capital to buy and repair a more expensive house. If I were to have a profit potential of $25,000 on a $100,000 fix and flip, I would want a profit potential of $50,000 on a $200,000 fix and flip. Because I am buying a more expensive house at $200,000, I won’t be able to buy as many properties since I am using more cash for down payments and repairs. Here is a great article with information on financing fix and flips.

Here is a review I did on the Rehab Valuator; a great tool for figuring the costs and profits on flips.

How much money have I made fix and flipping houses?

I sold ten fix and flips in 2013 and the total profits were well over $300,000. For part of last year I was partnering with my father and part of the year I was on my own, because I took over the business from him in September. We averaged over $30,000 profit for each fix and flip we did and so far this year I am on that same pace. I will have a few fix and flips profit $20,000 to $30,000 and I will have a few profit around $50,000. In the ten years I have been fix and flipping I have had a profit of $100,000 twice. The big money in fix and flipping for me is volume, not one extremely profitable property.

How is it possible to average $30,000 profit on a fix and flip?

Our market is increasing like much of the country and it has become tougher to find deals. I am still finding deals, in fact I have eight fix and flips being repaired or for sale right now. I am a real estate agent, which gives me a huge advantage when it comes to finding deals. I buy primarily off of the MLS and being an agent lets me save commissions and write offers quickly.

Here’s an excellent article on using others people’s money to flip.

You have to fix and flip a lot of homes to make money

I would love to make $100,000 on each fix and flip, but that’s not possible for me. I don’t always know which homes will work out great as flips and which will not. I have had unforeseen circumstances that caused me to hold a property for a year before it could be sold. That killed my profits and was one of the homes I lost money on. I have accepted that some flips will be great and others will not. If I continue to buy great deals the averages will be in my favor. My strategy is to buy as many fix and flips as I can that meet my criteria and continue to average about $30,000 in profit on each property. If you are looking for that one house that will make $100,000, you may have to look for a long time.

For more information on how to fix and flips homes including how to find properties, how to finance them, how to repair them and how to make the most money fix and flipping, check out my new book Fix and Flip Your Way to Financial Freedom. The book is $5.99 and available at Amazon as a 171 page eBook here. You can also buy a PDF version of the book in the Invest Four More store here.

How to get financing on fix and flips

One of the hardest parts about flipping homes is finding the money to buy the property. Most lenders do not like to lend on flips, because the loan will be very short and the lender will not make much money on it. To get a short-term loan you will have to use hard money, a portfolio lender or private money in most cases. Hard money will be very expensive with rates from 8 to 16 percent and origination fees from 2 to 5 percent. Portfolio lenders will have much cheaper money, but you will have to have an established relationship with them (I use portfolio lenders). Private money is a great option if you have a rich uncle or friend.

Here is a great site with more information on how to find private money lenders and structure deals with them.

How to avoid losing money on a fix and flip

Here are a few tips on how to avoid losing money on flips:

• Be very careful at foreclosure auctions. I use to buy 90% of my deals at the foreclosure auction. You have to buy homes for cash, without a title policy and sometimes you can’t see the interior of the home. If you buy at the foreclosure sale make sure you have a lot of room for repairs, title issues and possibly evictions.
• Always estimate more for repairs then you think. Repairs always cost more and more repairs always show up when fixing a house. I always assume there will be $5,000 more in costs than I calculate on each deal.
• Always account for financing and selling costs. When you sell a fix and flip you have to pay a real estate commission, title insurance, interest on your financing, insurance, taxes, utilities and more when you flip a property. Check out my case study on this fix and flip to see my costs.
• Be conservative on your values when you estimate value and price the home right!  Here is an article on how to value a home and how to sell a home. Some of the biggest losses for fix and flippers are due to overpricing homes and not lowering the price quickly to get them sold.

Conclusion

Fix and flipping is not easy, it takes patience to find properties, money to fix them up and market knowledge to sell them. If you can master fix and flipping it can create an awesome income and be a lot of fun as well. Becoming a successful fix and flipper will not happen overnight. To see exactly how I flip a house, here is an article that describes a case study I did on a recent fix and flip that made me over $50,000.