How to Flip Houses: Step-by-Step
House flipping is one of the most profitable short-term real estate strategies. When done right, a single flip can generate $20,000-$80,000 in profit over 4-8 months. When done wrong, it can drain your savings. The difference comes down to analysis, execution, and discipline. This guide covers every step from finding your first flip to collecting your profit at the closing table.
Step 1: Understand the economics of a flip
Every flip follows the same economic formula. Your profit is the sale price minus all costs:
Flip Profit = Sale Price − Purchase Price − Rehab Costs − Holding Costs − Selling Costs
Let us break this down with a real example. You buy a distressed 3-bed/2-bath for $140,000. You invest $45,000 in renovations over 4 months. Your holding costs (mortgage payments, insurance, utilities, property taxes) total $8,000. You sell for $245,000 and pay 6% in agent commissions ($14,700) plus $4,000 in closing costs.
Profit: $245,000 − $140,000 − $45,000 − $8,000 − $14,700 − $4,000 = $33,300
That is a 17% return on the $193,000 total investment, earned in about 5 months. Annualized, that is over 40% return. This is why flipping attracts investors despite the work involved.
Step 2: Learn the 70% rule
The 70% rule is the fundamental pricing framework for flippers. It states that you should never pay more than 70% of the after-repair value minus repair costs.
Maximum Purchase Price = ARV × 0.70 − Repair Costs
Using our example: $245,000 ARV × 0.70 = $171,500 − $45,000 repairs = $126,500 maximum purchase price. We paid $140,000, which is above the strict 70% rule. Experienced flippers sometimes stretch to 75% in hot markets with fast sales, but beginners should stick to 70% to maintain a safety margin.
The 30% margin accounts for holding costs (4-6%), selling costs (8-10%), and profit (15-20%). If any of these numbers are higher than expected, the 70% rule still protects your profit. For a deep dive into this calculation, see our MAO guide.
Step 3: Find flip-worthy properties
Not every distressed property is a good flip. You want properties where cosmetic renovation adds significant value, in neighborhoods where renovated homes sell quickly. Avoid properties with major structural issues, environmental hazards, or in declining neighborhoods where ARV is uncertain.
The best sources for flip deals:
Wholesalers are the primary deal source for many flippers. Wholesalers find motivated sellers and offer properties at 60-75% of ARV. Build relationships with active wholesalers in your market by attending REI meetups and joining local investor Facebook groups.
MLS. Properties that have been listed for 60+ days, are vacant, or have price reductions signal motivated sellers. REO (bank-owned) properties are often listed on MLS at below-market prices.
Direct marketing. Mail campaigns targeting absentee owners, pre-foreclosure homeowners, inherited properties, and tax-delinquent owners can generate off-market deals with the best margins.
Driving for dollars. Physically driving neighborhoods looking for distressed properties (overgrown yards, boarded windows, code violation notices). Record addresses and skip trace the owners. See our finding investment properties guide.
Step 4: Estimate the ARV accurately
The after-repair value is the most important number in your flip analysis. Overestimating ARV by even 5-10% can turn a profitable flip into a loss. Here is how to get it right:
- Pull comparable sales within 0.5 miles that sold in the last 6 months
- Match on bedrooms, bathrooms, square footage (within 20%), and condition (renovated)
- Use at least 3 strong comps. Discard outliers (highest and lowest if you have 5+).
- Adjust for differences: $20-$40/sqft for size differences, $5K-$15K for extra bedrooms or bathrooms, $10K-$30K for garage vs. no garage
- Your ARV should be at or below the median of your adjusted comps, not the highest
Read our complete ARV calculation guide and our comps guide for detailed instructions on pulling and adjusting comparables.
Step 5: Estimate repair costs
Repair estimation is where beginners lose money most often. The key is being thorough and conservative. Walk the property with a detailed checklist covering every system and surface.
Repair cost ranges (2026 national averages)
| Item | Cost Range | Notes |
|---|---|---|
| Kitchen full remodel | $15,000-$35,000 | Cabinets, countertops, appliances, backsplash |
| Bathroom remodel | $5,000-$15,000 | Vanity, toilet, tub/shower, tile, fixtures |
| Flooring (whole house) | $5,000-$12,000 | LVP $3-5/sqft installed, hardwood $6-10/sqft |
| Interior paint | $3,000-$6,000 | $1.50-$3/sqft for full interior |
| Roof replacement | $8,000-$15,000 | Asphalt shingle, standard size home |
| HVAC replacement | $5,000-$10,000 | New system with ductwork |
| Electrical update | $3,000-$8,000 | Panel upgrade + outlets/switches |
| Plumbing | $2,000-$8,000 | Re-pipe partial or full |
| Windows (all) | $5,000-$15,000 | $300-$600 per window installed |
| Exterior/siding | $5,000-$12,000 | Depends on material and coverage |
Always add a 15% contingency to your total estimate. Unexpected issues (hidden water damage, termite damage, code violations) are the norm, not the exception. See our repair estimation guide for a comprehensive cost breakdown.
Step 6: Finance the flip
Most flippers do not use conventional mortgages. The two primary financing options for flips are:
Hard money loans: Short-term (6-18 months) loans from private lenders that focus on the property value rather than your credit score. Typical terms: 10-14% interest, 1-3 points (origination fee), 70-80% of purchase price, 100% of rehab costs held in escrow. You bring 20-30% of the purchase price as a down payment. See our hard money loans guide.
Private money: Loans from individuals (friends, family, other investors) at negotiated terms. Typically 8-12% interest with more flexible terms than hard money. See our private lending guide.
Cash: If you have the capital, paying cash eliminates interest costs, speeds up closing, and makes your offers stronger. No financing contingency means sellers prefer your offer over financed buyers.
Step 7: Manage the renovation
Renovation management is project management. Your goals are finishing on time, on budget, and at a quality level that matches the neighborhood's expectations.
Get 3 bids from licensed, insured contractors. Compare scope of work, timeline, and price. Check references and look at past work. Never hire the cheapest bidder if their bid is significantly lower than the others.
Create a scope of work before hiring anyone. A detailed scope lists every task, material specification, and expected outcome. This becomes the basis of your contract and prevents scope creep (contractors adding work that inflates costs).
Establish a payment schedule tied to completion milestones, not dates. Never pay more than 30% upfront. A typical schedule: 20% at signing, 30% at rough completion, 30% at finish work completion, 20% at final walkthrough and punch list completion.
Visit the site regularly. Walk the property at least twice a week. Problems caught early cost hundreds to fix. Problems caught late cost thousands.
Track your budget weekly. Compare actual spending against your estimate for each line item. If one category is running over, identify where you can save elsewhere or accept a lower profit margin.
Step 8: Sell the flip
Your flip starts making (or losing) money the day you close on the purchase. Every month you hold the property costs $1,500-$3,000 in mortgage payments, insurance, utilities, and property taxes. Speed matters.
List before finishing. Put the property on MLS with "coming soon" status when you are 2-3 weeks from completion. This generates interest and potentially presale offers.
Price competitively. Your ARV analysis told you what the property is worth. Price at the ARV or slightly below to drive multiple offers and fast sale. Overpricing leads to extended days on market, which means more holding costs eating your profit.
Stage the property. Staging costs $1,500-$3,000 and can add $5,000-$15,000 to the sale price. Virtual staging ($200-$500 for photos) is a budget alternative. Staged homes sell faster and for more money than empty ones.
Professional photography. This is non-negotiable. Great photos generate showings. Showings generate offers. Budget $200-$400 for a professional real estate photographer.
Common mistakes that kill flip profits
Overimproving. Installing $50,000 kitchens in $200,000 neighborhoods. Match the renovation level to the neighborhood. Your renovated property should be among the nicest on the block, not twice as nice as everything else.
Underestimating timeline. Every flip takes longer than planned. Budget for 30% timeline overrun in your holding cost estimate.
Not having a backup plan. If the property does not sell at your target price, can you rent it and cover costs? Having a rental backup plan (BRRRR exit) protects you from worst-case scenarios.
Paying too much. No amount of renovation quality can fix a bad purchase price. If the numbers do not work at 70% of ARV minus repairs, walk away. The next deal is always coming. For more on this, see our fix and flip calculator guide.
Related articles
- Fix and Flip: The Complete Guide
- How to Calculate ARV: Complete Guide
- The 70% Rule in Real Estate Explained
- How to Estimate Repair Costs
- Hard Money Loans: Complete Guide