Starting a house-flipping business can be an exciting moment. You get to envision the beautiful homes you’ll create for new homeowners while also supporting yourself and your family. But once those LLC papers are signed, suddenly the anxiety sets in. What if your business fails due to some market fluctuation where no one’s buying any homes? How long does it take to flip a house, and what does it mean if you can’t hit that number?
The average time it takes to flip a home is around six months. Several factors can affect this, including market fluctuations, asking price, condition of the house, and others.
This article isn’t meant to scare you out of house flipping; quite the opposite. Let’s break down what sort of timeline you should aim for and what factors might prevent your home from selling quickly.
The Timeline of a House Flip
Flipping houses is not a fast project, so it’s important to understand all of the factors that come into play when budgeting your time. If the thought of holding onto a house for six months scares you, consider that our borrowers’ average profit on a flip is $39,714. Getting a nice $40k profit makes it well worth the wait, no?
Here are some of the major milestones you’ll have to hit for a successful flip. I’ve also included the average time each milestone takes, though you shouldn’t feel like that number is set in stone. It’s more to give you a benchmark that you can tailor for your specific situation.
Market Research – 2 – 4 weeks.
When you first begin flipping homes, researching the market will take more time. As your business grows and you become more experienced, you’ll become more familiar with your market and start to notice any trends that sway towards it favoring buyers or sellers.
Market research involves learning more about desirable areas that are hot on the MLS. Your goal as a flipper is not to work in those areas because the level of competition you’ll face can destroy your budget so fast that it’s breathtaking. Instead, you want to look at the areas adjacent to the hot neighborhood. This is your sweet spot because it’s close enough that homeowners would be willing to compromise for the proximity but far enough that you’re able to find hidden gems of properties that no one else is looking at.
Once you’ve found an area, you’ll need to know what types of homes are the quickest to sell. Some areas will be full of young professionals looking for low-maintenance condos that are within walking distance of restaurants and things to do. Most families would run screaming from that sort of setup and instead want single family, 3-4 bedroom homes in a quiet neighborhood with a good school district. Don’t buy the wrong home and hope you can disrupt the market.
Lastly, understand the future forecast of the area and how it might affect the salability of your flip. Are there new shopping centers that will be built nearby? If so, that could drastically change the traffic and flow of the area which could tank the market. On the other hand, there could be a new community restoration project starting in a few years. Knowing that ahead of time would be a useful piece that could swing the market in your favor.
Setting Up Your Finances – 4 – 6 weeks.
Securing your finances isn’t just about setting up a budget or opening a new checking account. You’ll also need to establish a relationship with lenders that understand the flipping industry. During the first time, you’ll need to work closely with them to determine what’s available to you in terms of financing and what hurdles might affect your chances for approvals or increases. You may need to spend additional time here fixing your credit score or correcting mistakes blocking your path.
Once you’ve begun flipping multiple houses, you’ll still need to keep an eye on your creditworthiness and relationship with your bank, but you can expect the time to be cut down from your first go at it.
Establish or Reconnect with Your Network – 2 – 8 weeks.
You might be thinking, “Ryan, when are we getting to buying the actual house?” Patience, my friend. All of the work you do now will save you so much time later on. During this phase, you’ll need to start making connections with professionals who you can rely on to help move your business forward.
At the very least, you’ll need a real estate agent, attorney, and general contractor. Don’t just pick the real estate agent that got you your first home or your second cousin who’s a criminal lawyer. You have to find pros who are experienced in working with fix & flip business models because your needs will be vastly different from someone buying their vacation home.
Once you’ve got those essential folks in your contact list, start looking for specialists like plumbers, electricians, roofers, etc. The easiest way to do this is by networking with other house flippers in your area. Don’t be intimidated by this if you’re an introvert; house flippers are some of the most open and helpful people I’ve ever met. Reach out and establish connections with other like-minded businesses in your area and ask for referrals.
Find and Buy a House – 2 – 12 weeks
The ability to find and buy a house quickly will depend on how successful you were in nailing down the first three steps. If I could offer you one piece of advice, it would be: avoid the MLS altogether. The pricing and competition will drastically reduce any type of profit you hope to make.
What I like to do and recommend to all of our DHM clients is to use the Driving for Dollars method. We have a whole series of posts about how to do it, so check out the link above if you’re interested or download our app. Driving for Dollars will be key to finding off-market properties that ensure your business can earn steady revenue and avoid costly bidding wars.
Begin the Flip! 6 – 8 weeks
Now that you’ve got the keys, it’s time to begin renovating the home. Many things come into play when successfully renovating a house, but I think the most important is to set a hard budget and stick to it. Budget creep is common and can seriously mess up your chance at earning a profit on the flip. Whenever you decide to start upgrading things like cabinets, countertops, floors, etc., you’ll have to do new calculations to make sure that your new asking price covers your costs without pricing you out of the market. You’ll need to find a balance between improving the house and leaving some things for the homeowners to customize or tweak.
Sell the Property – 1 – 8 weeks.
Now comes the best part. When it comes to selling, I’d recommend letting a real estate agent handle the first few flips instead of doing it yourself. New flippers can get emotionally tied to the work done, or the details potential homebuyers don’t notice, so it’s best to remove yourself from the situation entirely.
1 – 8 weeks is a broad range, I know. The actual amount of time your house sits on the market will depend on market conditions, price, and a number of other factors.
What Could Prevent Your Investment Property from Selling?
If you feel like you’re not selling the home as quickly as you’d like, there are a few places to look for reasons why.
Not Enough Money Was Invested
For the most part, homebuyers are looking for turnkey-ready properties and will be going over your fix & flip with a fine-tooth comb. If your only rehab was a new coat of paint on the walls but leaving massive problems with the plumbing or electricity, you could have a hard time getting the house to sell. Try to see the home from a buyer’s perspective, or ask a friend to do a walkthrough and give feedback. There could be blind spots that you’ve missed that make all the difference between selling for top dollar and beginning the price cut time crunch.
Not Enough Time Was Spent, or You’re Becoming Impatient
If you’re feeling a time crunch due to finances or other issues, it’s going to be tough to have the patience necessary for a successful flip. Make sure that any time you undertake a fix & flip, you’ve got some other way to keep money coming in. Fixating on your dwindling savings will only lead to poor decisions being made that affect your potential profitability. Have a plan for how you’ll provide for yourself and your family during these six or so months that money is hemorrhaging out.
Poor Construction Work
If you don’t know how to fix something, leave it to the pros and not YouTube. Shoddy construction work will get noticed during the inspection or appraisal and might require more money to fix.
That said, just because you don’t know something today doesn’t mean you can’t learn it tomorrow. The more experience you get flipping homes, the handier you’ll become. Just don’t put a lot of pressure on yourself to be the problem solver for all issues. Instead, be the middleman who gets the right people to fix it the first time.
Bad Market Conditions
If you skipped spending time in the market research portion, you could deal with those repercussions when it’s time to sell. We’ve been in a seller’s market for a few years now, but that bubble can and will eventually burst. Neighborhoods can change, curb appeal can drop, and subsidies can get moved to other communities. Don’t take your timing for granted or expect the market will always be in your favor.
You’ve Set an Unrealistic Asking Price
If you’ve set too high an asking price, you could see your property sit on the market for months. You may think it’s a fair price, but look around the neighborhood and see what’s sold recently and for how much. Is it well above the property values of the neighbors? If so, what’s so great about your home that makes it worth the price? This especially comes into play when you’re dealing with almost up-and-coming neighborhoods. Some home buyers won’t want to be the pioneers and would prefer to buy property in a more established community for the equivalent price, if not more.
It’s Just The Wrong Property
This one is just a catch-all because sometimes there is no good reason. It happens to all of us at least once and is so frustrating. The best thing you can do is find a way to at least break even and move on to the next one. If it looks like you’ll be holding onto it for a while, consider using it as a rental property. That way, you’ll be able to recoup some of your costs while waiting for that right buyer to come along.
Final Thoughts
There’s a lot that goes into running a successful fix & flip business. The better you understand all of the variables that factor into how long it takes to flip a house, the better prepared you’ll be. Start at the high end of the things I’ve mentioned above and cut them down as you become more experienced. Being conservative with your time and budget will go a long way to ensuring your business becomes profitable quickly.
To learn more about real estate investing, sign up for our free webinar!
COMMENTS