When starting a house flipping business, savvy investors seek properties ripe for transformation. They aim to buy low and sell high. Thus, the key to success includes identifying the best places to flip houses.
But before diving into the realm of house flipping, it is essential to understand the fundamental principles that underpin this business. That is because the venture demands a keen eye for potential, a knack for budget management, and an understanding of the local real estate market. Hence, this post will explore the top places where you can start a house flipping business.
Why start a house flipping business?
Engaging in house flipping has been the pathway to wealth for real estate investors. That is because it has the potential to yield substantial profits and does not demand a particular educational background or formal training. Nonetheless, acquiring the essential skills and comprehending the associated risks is imperative.
If you are wondering whether house flipping is the right business for you, consider the following reasons:
- Low Startup Costs: One of the most appealing aspects of starting a house flipping business is the relatively low startup costs. You can make an out-of-pocket investment or take a fix-and-flip loan to start this venture.
- Quick Return on Investment (ROI): A well-executed flip can yield an immediate ROI, allowing investors to recoup their initial investment and profit in months. A quick ROI boosts financial liquidity and allows reinvestment in additional projects.
- Potential for Lucrative Profits: House flipping offers the potential for substantial profits, making it an attractive venture for those seeking significant financial gains. Buying properties at a lower price, enhancing their value through renovation, and selling at a higher market price can result in lucrative returns.
- Multiply Your Earnings: Successful flippers often leverage their profits to take on multiple projects simultaneously, compounding their earnings.
- Possible Source of Passive Income: Beyond immediate gains, house flipping can also serve as passive income. Some investors transition from flipping to holding properties as rentals, creating a steady income stream.
How to Find Cities for Your House Flipping Business
If you are an aspiring property investor, you might be curious about how to start a house flipping business. The key is to select the suitable locations. To help you identify the cities where you can start flipping houses, here are four strategies to consider:
- Choose a Popular Market: Opting for a famous real estate market is often strategic. Cities that consistently attract homebuyers and renters can provide a steady stream of opportunities for house flippers. High demand can help you sell your renovated properties faster and at a premium price. Research cities with solid population growth, job opportunities, and a desirable quality of life to identify these promising markets.
- Keep an Eye for Catalysts: Identifying cities with catalysts for change is another smart approach. Look for areas where infrastructure development, job centers, or major corporations expand. These catalysts can drive housing demand, potentially increasing property values in the long term. Keep an ear to the ground for news about upcoming projects or investments that could positively impact the local real estate market.
- Consider School Rankings: For families, the quality of local schools is critical when choosing a place to live. Areas with highly-rated schools often experience more stable property values and attract a steady influx of families. Research school district rankings and consider cities with top-performing schools to ensure a broader pool of potential buyers or renters for your flipped properties.
- Get Familiar with Local Taxes: Different cities have varying property tax rates and regulations. High property taxes can erode your profit margins, so it is essential to research and understand the tax implications in your chosen cities. Look for areas with reasonable property tax rates and tax-friendly policies to maximize profitability.
10 Best Places to Flip Houses
According to ATTOM’s quarterly US House Flipping Reports, flipped houses and condos represented 9% of the sales during the first quarter of 2023. Earning through house flipping exists across various markets and housing cycles, although strategic choices can significantly enhance your success. Hence, knowing the places with the highest home flipping rates can be helpful for new and aspiring real estate investors.
Gila Bend, AZ
If you want to purchase affordable suburban houses you can buy and flip, consider flipping houses in Arizona. The average cost of a house for sale in Gila Bend, AZ is $181,039. Starting a house flipping business in this city is ideal if you target aspiring homeowners looking for modestly-priced homes in a family-friendly neighborhood.
Eighty Four, PA
Flipping houses in PA allows property investors to cater to families and retirees. Buying a house in Eighty Four allows homeowners to live in a commuter-friendly neighborhood. This enables them to easily reach top-quality public schools, offices, and healthcare facilities.
Harmony, PA
If you want to learn how to flip houses in PA, consider starting in Harmony. This tranquil, small town boasts a low cost of living and a growing economy. You can flip houses in Harmony to cater to aspiring homeowners relocating for better-paying retail, education, and manufacturing jobs.
Fort Pierce, FL
Flipping houses in Florida is a popular real estate venture. In the case of Fort Pierce, people purchase residential properties in the city because of the warm climate and the low cost of living. Its unique selling point is its proximity to the coast.
Willamina, OR
The Beaver State sees an average of 0.9% annual population growth between 2010 and 2021. Population growth can catalyze flipping houses in Oregon. Meanwhile, Willamina is a small town with a low living cost and a growing economy.
Huachuca City, AZ
Huachuca City is another excellent place to start a house flipping business to attract military families and professionals. For one, proximity to military bases can influence demand for rental properties. There are also emerging markets in trade and transportation, education and health, and professional and business services that can impact the need for residential properties in the city.
Bedford, TX
If you think of flipping houses in Texas, start in Bedford City. It is part of the Dallas-Fort Worth metropolitan area, which has seen significant growth regarding population and businesses. The main drivers of change in the region are its transportation system and major universities that produce a diverse and skilled workforce.
Rainier, WA
Rainier may be a small town, but it can be a great place to start flipping houses in Washington State. That is because it has seen a 9.14% increase in population and a 9.08% increase in median household income. To leverage the growth in purchasing power, consider investing in properties near workplaces to reduce the residents’ commute time.
St. Paris, OH
St. Paris boasts a stable housing market, making it ideal for new real estate investors. That is because it entails decent income from flipping houses in Ohio. Moreover, there is enough demand for residential properties in the city.
Coplay, PA
What makes this small borough in eastern Pennsylvania attractive to aspiring homeowners is its proximity to larger cities like Allentown and Bethlehem. Hence, you can start a house flipping business in the city and cater to people prioritizing the low cost of living and accessibility to city infrastructure.
Honorable Mentions
- Fayetteville, NC: While they may not be among the top 10 places with the highest home flipping rates, flipping houses in NC can be an excellent idea. That is because the city of Fayetteville is near Fort Bragg, home to military families, retirees, and contractors, which can influence the housing market.
- Gloucester City, NJ: Flipping houses in NJ can be fruitful if you can leverage what makes Gloucester City an excellent place to live. The city is known for its low living cost, top-quality public schools, and family-friendly environment.
The Cost of Flipping Houses
Starting a house flipping business requires careful financial planning to ensure you have the resources to purchase, renovate, and sell properties successfully. Here’s a breakdown of the costs involved and how you can plan your budget:
- Acquisition Costs: The initial cost involves purchasing the property. This includes the purchase, closing, and real estate agent fees. To prepare for acquisition costs, you should determine their maximum budget for property acquisition and seek pre-approval for financing if needed.
- Renovation Costs: Renovation expenses are a significant part of house flipping. This encompasses materials, labor, permits, and inspection fees. To budget for renovations, you should obtain detailed quotes from contractors, create a renovation plan, and factor in a contingency budget for unexpected expenses.
- Holding Costs: Holding costs include property taxes, insurance, utilities, and mortgage payments if financing is used. You should calculate these ongoing expenses and estimate the time to complete the flip to accurately budget for holding costs.
- Financing Costs: If you use real estate investment loans to purchase the property, consider the interest payments and loan origination fees. Calculating the total interest cost over the expected holding period is essential to include in the budget.
- Selling Costs: Selling a property will incur additional expenses like real estate agent commissions and closing costs. These costs should be considered when determining the listing price and expected proceeds from the sale.
- Contingency Budget: Unforeseen issues, like hidden structural problems or delays, can arise during a flip. Setting aside a contingency budget (typically 10-15% of the overall budget) helps cover unexpected expenses without jeopardizing the project’s profitability.
House Flipping Business FAQs
How can a house flipping business ruin my credit?
Starting a house flipping business can impact your credit in several ways. One common scenario is if you use personal credit or loans to finance your house flips. If a project encounters unexpected problems or sells less quickly than expected, it can incur late fees and negatively affect your credit score.
Also, multiple ongoing house flips with high debt levels can raise your debt-to-income ratio. This may make obtaining financing for future projects or other investments harder.
What is a good ROI when flipping houses?
A good return on investment (ROI) when flipping houses can vary depending on location, property type, and the level of renovation required. However, a general rule of thumb is to aim for an ROI of 20-30% after all expenses, including acquisition, renovation, and selling costs.
Can I flip houses as a side hustle?
Yes, flipping houses can be pursued as a side hustle, but it requires careful time management and planning. House flipping demands significant time and effort, particularly during the acquisition and renovation.
Many successful part-time flippers start with smaller projects and gradually scale up as they gain experience and confidence in their abilities. Hence, assessing whether you have the necessary time and resources to balance house flipping with other commitments is essential.
Make Your House Flipping Business a Rewarding Endeavor
It is important to remember that the success of a house flipping business hinges on careful planning, market research, and prudent financial management. When determining the best cities to flip houses, a thorough analysis of local real estate conditions, population trends, and economic indicators is paramount.
Each city presents its unique challenges and opportunities. Thus, seek out areas with strong potential for appreciation, robust demand, and favorable tax structures. The best cities to flip houses may evolve, so staying informed about market dynamics is also essential.
Ultimately, success in the house flipping business goes beyond buying, renovating, and selling properties. It is about making informed decisions, mitigating risks, and adapting to changing market conditions.
KEY TAKEAWAYS
- Some of the best places to start a house flipping business include Gila Bend, AZ, Eighty Four, PA, and Harmony, PA.
- Engaging in house flipping can yield substantial profits and does not demand a particular educational background or formal training.
- Starting a house flipping business requires careful financial planning to ensure you have the resources to purchase, renovate, and sell properties successfully.
