Flipping homes isn’t just for reality TV stars, it can be a path to wealth for everyday investors. But before you begin, you have to understand the process from start to finish. With the right process, your first flip can be a success by minimizing costly surprises.
At ABL, we’ve walked countless investors through the steps to flipping a home while providing financial support with our purpose-built hard money loan programs. If you need fast, flexible financing to get your project off the ground, we’re here to help.
What Is Home Flipping?
Home flipping is the process of buying, renovating, and reselling a property for a profit.
Typically, the property is distressed in some way, allowing you to buy it at a discount. By repairing and/or renovating the home, you can then resell it at a higher price. Any sale proceeds exceeding your original investment—including purchase price, renovation costs, and other expenses—are yours to keep as profit.
For example, say you buy a run-down property for $100,000. After $50,000 in renovation costs and $10,000 in holding expenses (property taxes, utilities, home insurance, etc.), you resell the property for $250,000. Your final profit is $90,000 ($250,000 – $50,000 – $10,000).
Of course, flipping a home is easier said than done. Here are detailed steps for pulling it off:
1. Set a Budget
Before you dive into home flipping, set a realistic budget. How much cash do you have to work with? This will determine the market, property, and types of flipping deals you can pursue.
However, you don’t have to pay for the property and renovation with cash. You can get a fix-and-flip loan from ABL to finance both. Our fix-and-flip loans can cover up to 85% of the property purchase and 100% of the rehab.
2. Choose a Market
Not all housing markets are suited for home flipping. Choose one where there is high housing demand and rising home values. That way, you can benefit from market appreciation on top of any forced appreciation from renovations.
Of course, investing in your backyard is ideal, but if it doesn’t show promising market trends, look elsewhere. Up-and-coming neighborhoods close to popular amenities like schools and shopping—that still have distressed properties to buy—have strong upside potential.
3. Build a Team
Flipping a home isn’t a one-person operation—It takes a team. To get off on the right foot, start building your real estate team now. It can include a local real estate agent, skilled contractors, knowledgeable mentors, and a lender who can help you close the deal.
For example, ABL’s local teams are experts in their markets. They can not only guide you through the flipping process but also advise you on the best financing options.
4. Find a Distressed Property
Once you’ve settled on a market, look for distressed properties with value-add potential. Foreclosures and tax deed properties are classic options, but any off-market property that needs repairs can have great potential.
Just make sure you do your due diligence by comparing deals, inspecting properties, and running return calculations. Speed up the process by using ABL’s deal calculator to estimate total project cost, net profit, and return on project cost.
5. Secure Financing
Most conventional lenders won’t finance a distressed property purchase, but private hard money lenders like ABL will. That’s because we weigh the property’s current and after-repair value more than your personal credit and income when underwriting.
So if you have irregular income or you’ve already maxed out your other financing options, pre-qualify for an ABL loan. It only takes a few minutes to apply, and we’ll get back to you within 24 hours. Plus, a pre-qualification letter shows sellers you’re serious and strengthens your offer.
6. Buy the House
When making an offer on a house to flip, negotiate the lowest possible price. After all, the lower the purchase price, the more profit you lock in upfront.
You should also follow the 70% rule, which states that you should pay no more than 70% of the property’s after-repair value (ARV) minus the cost of repairs. For example, if you estimate the ARV will be $300,000 after $50,000 in repairs, you should offer no more than $160,000 for the property ($300,000 x 0.7 – $50,000).
Of course, don’t forget to run a title search, get title insurance, and conduct a final walkthrough before closing the deal to protect yourself from last-minute complications.
7. Renovate
The renovation phase is when the real work begins. Start with any repairs needed to make the house habitable. From there, prioritize renovations and upgrades with the highest returns. According to the 2024 Cost vs. Value report, renovation projects with the highest ROI include garage door replacements (193.9%), entry door replacements (188.1%), and manufactured stone veneer (153.2%).
It’s also important to keep to a construction schedule. Do your best to stay on track to minimize your holding costs and maximize your returns. According to ATTOM, home flippers who sold homes in 2024 took an average of 162 days, or about 5.5 months, to complete the flips.
With ABL, you can count on lightning-fast closings and loan disbursements so you can waste no time finishing your flip on time. Plus, there’s no prepayment penalty, so if you finish early, you can keep any interest savings to boost your returns.
8. Resell for a Profit
Once the renovations are complete, work with your agent to professionally stage, list, and advertise the property online. Keep in mind that the market may have changed since you first analyzed the deal, so set a competitive price based on current local comps.
As the offers start coming in, be prepared to negotiate the best deal quickly to minimize your holding costs. Alternatively, if you’re struggling to sell or prefer to keep the property as a rental, consider refinancing into a long-term rental loan (aka a BRRRR). ABL offers flexible rental loans with competitive rates and LTVs of up to 80% (an easy requirement to meet with all the equity you gain from the renovation).
Whatever your flipping experience, strategy, or market, ABL is here to help. Pre-qualify for one of our hard money loans today to get the financing you need and boost your returns.