When you’re watching HGTV, flipping houses can look like one of the most exciting and profitable ways to get into real estate investing.
Whether you’re wanting to feel like a celebrity flipper with cameras surrounding you as you uncover hidden gems in your local market, or you’re just focused on finding an opportunity to make money…
…there’s one question that always comes up: how much do house flippers make?
And the fact that you’re wondering about this question means you’re at least getting started the right way.
So while those reality shows may make the process look incredibly simple and straightforward, they’re actually only showing you a very small portion of what goes into making those deals so successful in the first place.
In this guide we’re going to break down what a profitable flip looks like, how to ensure you’re minimizing your risk, and what you should be focusing on if you want to be a successful flipper.
We’ll get into the numbers shortly but, first, we need to touch on something for the brand new investors to understand what’s really happening:
What is House Flipping & Why is it So Popular?
House flipping is when investors purchase a property and then sell it for a profit.
There’s essentially two different paths you can take as a flipper: buying low and selling high or buying a house, making repairs and renovations, and then selling it.
House flipping can be incredibly profitable, if you do it right, although there are risks involved especially when you’re a new investor.
It’s a cool and flashy real estate investing business model that can help you achieve your lifelong dreams of financial independence, and even real wealth in some cases.
With the right guidance, mindset, and attitude, it is possible to turn house flipping into a viable life-long career — which is just one of the reasons it’s become so popular.
And when you take a look at the numbers involved in a basic flip, you can start to see why it’s become so popular, especially among new investors.
You can find a neighborhood with houses in the $250,000 to $300,000 price range and locate a distressed property whose owner is willing to sell for $200,000. Or less, in some cases.
You can buy the property for $200,000 to $250,000, put a bit of work into it, and then list it on the high end of the market (like they always show on HGTV) and walk away with a handsome $50,000 profit.
On the surface, that looks like an incredible deal, right? $50,000 profit for a couple months worth of work is something most people would be interested in.
But, as we begin breaking down the actual reality behind the house flipping model, you’ll start to see that things aren’t so straightforward and that there may actually be better models for you to spend your time and energy learning.
In fact, here are some other great REI business models that may be even more attractive to you than the standard flipping model you see on those HGTV reality shows…
- Wholesaling: This is actually one of the easiest ways to break into the real estate investing business. With wholesaling, you’re looking for distressed property owners who are looking to sell and then forwarding that information to an active investor. The active investor then pays you a finder’s fee for helping them locate the property and get it under contract. You can expect to make around $5,000 to $10,000 on each of these deals without having to take on the same risks that an investor would face.
- BRRRR Method: The BRRRR method is another extremely popular strategy that stands for “Buy, Rehab, Rent, Refinance, Repeat’. With this strategy, you can find a property, buy it, renovate it, then rent it out and have it re-appraised at a higher value. This lets you refinance to cash out the equity you built up during the remodel so you can put that cash toward your next deal — while keeping the cashflow from renting the property out.
- Buy-And-Hold: When you buy-and-hold or buy-and-rent a property, you’re looking for more long-term cashflow and equity in your deals. This model is great when you’re trying to build long-term wealth or investing in a downturned market — so you can hold the properties, build your cashflow, and then sell the properties at a later date for a higher return if your goals align more with the BRRRR method rather than building a portfolio of cash flowing properties.
- House Hacking: House hacking is a relative newcomer to the industry but is becoming more and more popular every year. With this strategy, rather than flipping at the end, you’re actually looking for undervalued or distressed multi-family properties that you can put a bit of work into and then live in one of the units as your primary residence while renting out the remaining units to increase your cashflow or cover your mortgage so you’re essentially living rent-free and building equity while you do it.
And while each of those models are (arguably) better than house flipping, you’re here for the answers to the question: how much do house flippers make?
So, for a quick answer, we have to tell you: it depends.
A better question is…
How Much Do House Flippers Usually Make?
Generally speaking, house flippers can expect to make around $10,000 to $50,000 per deal and $100,000 to $500,000 per year depending on how many deals they do per year.
According to active investors on Bigger Pockets (an excellent resource for both new and seasoned investors, alike), you can expect around a 15% return on the after-repair-value (or ARV) of the property once it’s put back onto the market in a renovated condition.
How much flippers usually make on a deal, though, depends on how much the property was purchased for, how much time is involved in renovating it, how long it takes to sell, and how many unforeseen surprises popped up during the project.
If it’s what investors refer to as a “lipstick, carpet, and paint” deal, you can get in and out fairly quickly and turn over properties faster than you would if the property requires a full rehab due to something like foundation issues, mold inside the walls, or years of serious neglect.
For those projects, you might make a bit less overall, but your risk is also lower. This is when that 15% figure is a good baseline estimate.
For higher returns, though, you will typically expect to take on higher risks — which is only recommended if you’re a seasoned flipper.
This is where things start to get tricky, though, and the nuances of each deal start to come into the conversation. For that, there’s another generally accepted rule among flippers that you can use while you’re performing due diligence.
Understanding the 70% Rule For Flipping Houses
The “70% Rule” in house flipping helps you quickly look at a deal and figure out how much you should be paying for it BEFORE you move forward.
And, as a general rule, means that you start by looking at the properties around the one you’re thinking about buying, and then multiply that by 70% as a starting point.
To give you an example, let’s say you’ve found a property in a neighborhood with houses around it selling for $150,000 in completely renovated, ready-to-market conditions.
As a baseline, 70% of that price would mean that you need to get the property for $105,000 to stand a good chance at making a profit.
But you want to take the rule and go one step further with it to ensure you’re not only making a profit but also protecting yourself in case you encounter unforeseen circumstances — like the property needing structural repairs, a new roof, full electrical rewire, plumbing rework, etc.
To figure out how much you should be paying for the property, you’ll need to take that 70% rule and subtract your estimated repair costs from it.
To get those, here are some general ballpark figures you can expect to pay:
- For a ‘light’ rehab that only requires carpet and paint, you can expect repair costs to average around $15 per square foot — or around $15,000 in our example.
- For a ‘medium’ rehab, where you’ll be buying carpet and paint, and remodeling the kitchen and bathrooms, you can expect around $25 per square foot — or $25,000.
- For a full ‘heavy’ rehab, you can expect around $50 per square foot — which equates to around $50,000 in our example.
Keep in mind, though, that these are general ballpark numbers but they’re good for helping you figure out how much you should be paying for the property you’re interested in flipping.
Going back to our example of properties in the neighborhood selling for $150,000, and running the 70% rule, we know we can start subtracting repair costs from the $105,000 figure.
Then, let’s assume you’re going to do a medium rehab where you’re replacing flooring and paint, remodeling the kitchen and bathroom.
For a 1,000 sq. ft. house, you’re looking at an additional $25,000 in repair costs, bringing that $105,000 total down to $80,000.
Using this math, you know that if you can get the property for $80,000 or below, you stand a really good chance at turning a healthy profit when you finish renovations and flip that property.
Because your money is made when you buy the property, so to speak, if you aren’t able to get in for less than $80,000, you know right away that you might want to start looking for something else instead of moving forward with the one you’re looking at.
If you can buy the house for $80,000 and put $15,000 into it, you’re into it for around $95,000 total invested for a property that has the potential to sell for $150,000 once you’ve finished renovating it.
Again, though, this is really rough, back of the napkin math but it is a really good starting point to help you figure out how much potential is inside of a deal.
And while that additional $55,000 looks like a really, really good deal from the outside, you have to consider additional costs you’ll incur while you’re holding the property.
What is The Cost of Flipping Houses?
The actual costs involved while you’re waiting to sell can vary from property to property.
By not understanding these costs, flippers end up taking on far more risk than they would have if they spent more time putting the property under a microscope instead of letting their excitement get the best of them.
Here’s just some of the costs you will incur on every deal that you do.
Purchasing The Property
This is going to vary from market to market so you want to look at the average of the comparable properties surrounding the one you want to purchase.
Your biggest cost is going to be purchasing the property, though, and when you remember that your profit is made when you buy, you’ll want to brush up on your negotiation skills to ensure you’re keeping the costs of purchasing the property as low as possible.
Let’s go with the same example we used and assume you can buy the property for $80,000.
Your next biggest expense will be repair costs.
In the example we used, with a light remodel, you can expect around $15 per square foot for renovations — or around $15,000 total before it’s ready to be sold.
Renovations can be anything from a simple carpet & paint flip, all the way up to electrical, plumbing and foundation issues, new roof, landscaping, doors, windows, kitchens, baths, etc.
The costs can quickly add up, especially if you don’t know what you’re doing or looking at.
This is why it’s so important to put the property under a microscope so you can uncover these potential problems before you sign on the dotted line and secure the property to begin work.
Holding costs are the expenses you’re going to incur while you have the property in your possession. These are things like your mortgage, utilities, property taxes, etc. And depending on how long it takes you to renovate and flip the property, these costs can vary wildly.
For simple flips, it can take around 3 months. For more involved flips, you can expect upwards of 6 months. That means you’ll have 3 to 6 months worth of holding costs.
You can get a good idea of what you’ll run into by looking at your own mortgage, your utility bill, and your property taxes. These costs will continue adding up month, over month, until the property is sold.
So let’s say your mortgage is $750 per month, your utilities cost $250 per month, and your taxes are 1% per year. That equates to around an extra $90 per month.
This means your total holding costs each month will be around $1,100, give or take.
If it takes you 6 months to flip the property, you’re looking at nearly $7,000 just in holding costs.
Then, when you’re ready to sell the property, you will be paying closing costs, as well.
Typically, these are around 3% of the property’s value. Which, if you’re asking $150,000 for the property, you can expect around $4,500 just in closing costs.
In some cases, you can get the buyer to pay these — but I wouldn’t bank on it if you want to be safe. And if you’re doing the math as we go, you’ve spent around $106,500 up to this point.
Marketing & Sales Costs
Then we start looking at what it costs to actually market the property to get buyers interested in it and making offers on it. Depending on the agent you’re working with, you may be required to foot the bill for these marketing costs.
If that happens, you can expect to spend around another $1,000 for your agent to get the property sold — before paying their commission, which typically runs around 2-3%.
That is an additional $3,000 to $4,500 going out, on top of the $1,000 in marketing costs.
Which brings our grand total to around $112,000 invested in this property just to get it sold.
And that’s if everything goes according to plan, you stay conservative in your estimates, and the house sells quickly once you’ve finished renovating it.
Since distressed and neglected properties love to hide surprises (as I’m sure you’ve seen on those HGTV shows), you need to account for those potential risks in your budgeting.
This is what makes house flipping so risky.
At this point, you’re into the property for nearly $112,000 and expect to sell it for $150,000, so any hidden pitfalls or unexpected surprises can quickly dwindle the remaining profits.
These surprises could be anything from foundation or structural issues, to a market crashing while you’re in the middle of your renovation.
The Importance of Getting a GOOD Deal
Remember the saying “you make your money when you buy”.
Because if you can negotiate a good deal on a property, you’ve already made your money.
From there, your job is protecting your profit because flippers tend to go upside down when they think that it will cost them less to repair than it actually does. That’s why getting a good deal is so critical — and being conservative with your repair costs and timelines is a requirement.
How Many Houses Should You Flip Per Year?
Now let’s assume that everything went according to plan and that you actually make the $38,000 profit that’s left in the example we’re using.
You will also need to account for taxes when you sell the property, which can be incredibly complex but will come from the profits you’ve generated when you sold.
Here’s a good article that breaks down the taxes you can expect to incur.
So how many houses you should flip per year comes down to how much money you want to make and how much risk you’re willing to take.
While we’ve given you rough estimates and general tips you can follow to make money as a house flipper, at the end of the day it’s an incredibly personal decision based on you, your goals, and the market that you’re working in.
Using our example, if you want to make $100,000 per year, you need to flip at least 3 properties per year. If you want to make $250,000 per year, you need to flip at least 7 properties per year.
From there, you can do the math based on your own financial goals and your risk tolerance.
Final Thoughts — What Should You Expect To Make?
While those shows make house flipping look incredibly exciting and lucrative, it’s our hope that this guide helps open your eyes to the bigger question: how much do house flippers make?
Because the answer is: it depends.
Every property is different. Every renovation will be different. Every market will be different.
As a general rule, though, you should expect to make around 15% profit for a deal to make sense and only move forward on a deal that has passed the 70% rule after you’ve subtracted repair costs.
House flipping is not for the faint of heart. But it can be incredibly rewarding when you go into it with the right mindset, attitude, education, and expectations.