How to Start a House Flipping Business
By Bazal Razzaq
Chief Editor
Updated: October 04, 2023
Editorial Note: We earn a commission if you use the services recommended on this page. Commissions do not affect our opinions or recommendations.
- Business Plan to Flip a House
- Form your business into a legal entity
- Register your House Flipping Business for taxation
- Open a bank account for your business and get a credit card
- Manage House Flipping Business Accounts
- Apply for necessary permits and licenses
- Obtain House Flipping Business Insurance
- Define your business brand
- Create a House Flipping Business Website
- Arrange a Business Phone System
- Frequently Asked Questions (FAQs)
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One of the most profitable investment strategies used by real estate investors is a flip model and doing a House Flipping Business. This investment strategy involves market analysis, placing offers, doing urgent repairs, and then doing proper marketing to sell the property.
Learn How to Flip a House by following our step-by-step guide.
10 steps to start your own House Flipping Business
- Business Plan to Flip a House.
- Form your business into a legal entity.
- Register your House Flipping Business for taxation.
- Open a bank account for your business and get a credit card.
- Manage House Flipping Business Accounts.
- Apply for necessary permits and licenses.
- Obtain House Flipping Business Insurance.
- Define your business brand.
- Create a House Flipping Business Website.
- Arrange a Business Phone System.
We have compiled all the necessary steps in this guide so that you can easily start a flipping Business. It will ensure that your business is well planned out, registered and legal.
#1 Business Plan to Flip a House
You must prepare a business plan as it helps you to figure out tiny details about your business that require your attention.
You can start by answering the following questions:
- What will you name the business?
- What will be the start-up and ongoing costs?
- Who do you want to target?
- How much will you charge the customers?
Don’t worry, we have answered the questions for you.
What will you name the business?
Choosing the correct name for your House flipping Business is as important as preparing a business plan. If you haven’t decided on a name yet, use the House Flipping Business Name Generator. It will be good to check the following before registering the name for the business.
- State’s Business record.
- Trademark records of state and federal.
- Social media platforms.
- Check the availability of the Web domain.
What will be the start-up and ongoing costs?
A huge amount of capital is required to start a buy-and-flip business by the investors. The expenses include- funds to purchase property, renovation of the property, payment to the broker, and several other costs related to buying and flipping.
The investor pays marketing costs and fees to maintain the business. The Home Flippers pay real estate fees, closing costs, and title fees along with renovation costs. The flippers pay full interest rates along with capital gains on the sold property. Homes occupied for less than a year are taxed the same as income whereas homes held for more than a year range from 0% – 20% depending upon the total income of the flipper.
House Flipping Business Includes the following costs-
- Rehab costs.
- Marketing cost.
- Maintenance cost.
- Property cost.
Who do you want to target?
A buy-and-flip investor works on two ends. On one hand, they work with property owners and on the other they sell property to the buyer willing to purchase it. Sometimes, a property owner wants to sell the property as quickly as possible because-
- He/She has to move quickly.
- Pay for the Mortgage.
- Other financial constraints.
The investor can offer the seller a mutually beneficial arrangement in which the buy-and-flip investor gets custody and the seller’s stress is reduced.
How much will you charge the customers?
The price charged by buy and flip investors for a property is the same as the price of other properties in the area. However, an investor can sell a property at a higher price if the buyer is willing to pay.
A buy-and-flip investor can make a huge profit by purchasing the property at a lower price and flipping it for a higher price.
You can also earn more profit if you hold the property for more time before flipping it.
#2 Form your business into a legal entity
In general, the common types of business structure are sole proprietorship, partnership, limited liability company (LLC), and corporation. If you wish to protect your belongings from being held liable when your business gets sued, then establish a legal business entity.
You can establish an LLC on your own and pay the minimal state LLC costs or hire the LLC Services for an additional fee.
#3 Register your House Flipping Business for taxation
You have to register for several state and federal taxes
before starting your business in full swing. For tax registration, you need an EIN which can be obtained from the IRS website.
#4 Open a bank account for your business and get a credit card
Your personal assets are always at risk if you mix your business and personal accounts. Therefore, it is good to have a separate bank account and credit card for the business.
Open Business Bank Account-
It is good to have a separate bank account for the business for the following reasons:
- Separate personal assets from the company’s assets
- Easy Accounting and Tax filing
Get a Credit Card-
A credit card helps in the following manner:
- Distinguish personal and business expenses.
- Safeguard company’s credit history.
#5 Manage House Flipping Business Accounts
Maintain a timely record of your expenditures and sources of income to evaluate the performance of your business. A well-maintained account simplifies the tax filing process.
#6 Apply for necessary permits and licenses
Failure to apply for necessary permits and licenses would result in heavy fines or can cause the business to shut down.
A house flipping business would require you to have certain state permits and licenses. You can learn more about the licensing requirements from SBA’s reference to state licenses and permits.
If you wish to sell your own property, then you must get a broker’s license. The broker’s license requirements include a real estate agent license, coursework, completion of a broker’s license exam, and hours in the workforce.
To obtain information about local licenses and permits, check with your own town, city, or county office.
Real estate investment businesses must make it mandatory to sign a services agreement before starting a business. The agreement would clarify customers’ expectations and minimize the risk of disputes by mentioning terms and conditions, expectations and property ownership.
#7 Obtain House Flipping Business Insurance
Acquiring a business license will protect your company’s well-being during times of loss. Different types of businesses have different insurance policies. If you are not sure about the risk involved in your business, we suggest having General Liability Insurance. It covers all the needs of a small business.
Another suggestion would be to have Workers’ Compensation Insurance.
#8 Define your business brand
Your brand is what your company does and how it is recognized by the people. Building up your brand will help you stand ahead of your competitors. Start by creating a logo for your website.
You must put in effort to build your reputation as a good flipper. It will make it easy to sell homes in the future.
#9 Create a House Flipping Business Website
Once your brand is defined and the logo is created, you must focus towards creating a website for your business. Following are the reasons why you shouldn’t delay in building a website:
- Legal businesses have websites.
- Social media accounts on Facebook, LinkedIn etc cannot replace a business website.
- Tools like GoDaddy Website Builder have simplified the website-building process. You can also use other tools such as WordPress, WIX, Weebly, Squarespace, and Shopify.
#10 Arrange a Business Phone System
Arranging a phone set for your business will be a great way to separate business and personal life. It will help streamline your business, provide legitimacy, and allow potential customers to locate and get in touch with you.
The buy and flip investor will have to spend good time on each investment proposal. They must be committed and well-organized.
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Frequently Asked Questions (FAQs)
Buy and flip investors earn money when they sell property to get a profit on their investments. The investor’s profit is calculated as
Profit = Sale Price of Property – (Purchase Price of Property + Rehab Costs + Auxiliary Costs)
The profit depends upon the number of properties sold and the returns on the investment. The Home flippers earn hundreds of thousands of dollars in a year when they have established themselves in the market.
They have to flip 5 homes a year to earn in six figures.
A buy-and-flip investor will hire a wholesaler to search and bargain deals from his/her side. The investors will have to market their business to wholesalers to improve the purchasing process. It can be done through digital marketing, print marketing, social media and networking.
We have laid down some activities that an investor does-
- Look out for properties that are available for purchase through multiple listing services or off-the-market properties.
- Secure financing for purchases by working with traditional lenders, private lenders, and hard money lenders.
- Prepare a list of real estate wholesalers and bird dogs.
- Property offerings.
- Closing offers.
- Build a list of contractors.
- Rehab properties- including HVAC repairs, Landscaping, Electrical repairs, and Structural repairs.
- Marketing of Property.
- Prepare a list of title companies and check if the title is valid and issue insurance.
- Appoint a real estate broker to increase sales.
- Sell properties.