How To Find Houses To Flip: A Complete Guide

In real estate, it’s often said that money is made on the purchase, not the sale — and this is especially true for home flippers. Securing a low enough purchase price to justify the flip is essential. But first, you must learn how to find houses to flip.

How Do You Find a House To Flip? 

You can find a house to flip a variety of ways — real estate wholesalers and auctions, public record searches, networking. Here is a full list of the most common ways to find a house to flip:

• Real estate agents: Agents are deeply familiar with the market and can watch for properties for sale that meet your criteria, including ones not publicly listed (aka pocket listings). For optimal results, hire an agent who specializes in distressed sales.
• Real estate wholesalers: Wholesalers put properties under contract to assign to investors for a fee. While the fee eats into your profit margins, it could be well worth the cost because it saves you the work of finding deals on your own.
• Real estate auctions: Counties nationwide hold these auctions to offload foreclosed or bank-owned properties. They can be a great place to find discounted homes as opening bids are often set well below market value.
• Online listings: Many real estate sites list countless homes for sale that you can filter by price, year built and property type (for example, foreclosures, preforeclosures, auctions, etc.) to quickly narrow potential flipping opportunities.
• Driving for dollars: This means driving through neighborhoods to spot distressed properties, like those with overgrown lawns, boarded-up windows, and other signs of disrepair. You can then contact the owner to see if they’re interested in selling.
• Public record searches: Scouring public records for delinquent taxes and other liens can reveal homeowners who may be motivated to sell their properties quickly. Visit your county assessor’s website or office to learn more.
• Direct mail marketing: After compiling a list of potential properties to flip, you can send personalized letters or postcards to the owners. This could spark their interest in selling their property to you without listing it on the market.
• Networking: Investors, contractors, hard money lenders, and other industry professionals can be great referral sources. Develop strong relationships with them so that when they encounter a potential flip that meets your criteria, they’ll send it your way.

What To Consider When Selecting A House to Flip

Now that you know how to find homes to flip, here’s what to do before choosing one:

Determine your Budget

Flipping properties is cost-intensive. It may require upfront capital for design, permitting, renovation, and marketing work, not to mention holding costs (like property taxes, utilities and home insurance). As a result, flippers must carefully estimate flipping costs before taking on a project to ensure they don’t get in over their heads — especially if it’s their first flip.

Start by setting a budget. Determine how much you can realistically invest in the project before getting the proceeds from the eventual resale. From there, you can work backward to see if a potential project is feasible. Don’t forget to add some financial cushion to your budget in case the project costs more than expected.

Look for the Right Location

A successful flip depends as much on a property’s location as its renovation. This is because location helps determine the property’s resale value.

For example, a property in a desirable neighborhood (low crime rate, high school ratings, close to popular amenities, with good transportation options, etc.) will likely command a higher resale value once renovated. In contrast, even a well-renovated house in a declining or unpopular area may struggle to yield a significant profit since fewer people want to live there. The key is to choose a property in a good neighborhood with growth potential.

Consider The Condition Of The Home

A property’s condition affects renovation costs and your potential profit. That’s why even an extremely discounted property may not be a good deal in the long run. For example, it may have significant structural issues that require a new foundation or roof, creating a financial drain on your budget. By contrast, cosmetic repairs like new paint or flooring cost less.

To fully understand a flipping project’s potential return, you must estimate repair costs. Consider following the 70% rule, which says you should limit your purchase budget to 70% of the projected resale value minus expected repair costs. That way, you give yourself enough margin to help ensure a profit.

Research the Market

Carefully studying the market before choosing a home to flip has many benefits:

• It can reveal local buyer preferences so you know what types of renovations and upgrades are most in demand.
• It can help you identify other flippers so you can gauge the competition and learn from their strategies and mistakes.
• It can uncover local zoning restrictions and building codes so you can anticipate permitting costs and avoid unnecessary delays.

In short, researching the market provides a clearer picture of a flipping project’s potential risks and opportunities.

Explore Financing Options

Unless you have sufficient capital to fund a flip with cash, you may need to secure financing. From traditional mortgages to private investors, hard money lenders, and lines of credit, there are many options to get a loan to flip a house, each with its pros and cons.

Whatever type of financing you get, aim for favorable loan terms. For example, some lenders offer an interest-only period to minimize monthly payments during construction. Also compare interest rates, fees, and balloon payments to ensure you get the best loan for your project.

Evaluate Exit Strategies

Every home flip comes with risk since you can’t predict with 100% accuracy the future demand for the renovated property. That’s why it’s important to plan and evaluate multiple exit strategies.

For example, on top of reselling the property for a profit, you may research what it would take to turn it into a rental or offer seller financing for those unable to qualify for a traditional mortgage. Having multiple viable exit strategies helps ensure you don’t get stuck with an unwanted asset.

The Bottom Line

Finding a home to flip can be challenging, especially if it’s your first time. However, as you learn where to look and what to consider, your “radar” for home flipping material will improve, and you can gradually build a real estate flipping empire.

Ready to begin the home buying process? Rocket Mortgage^® offers affordable mortgages and other home buying services to millions of clients nationwide.