How to Find a House to Flip
Eager to start flipping houses? Your biggest question might be, “How do I find a house to flip?” This guide covers key considerations for finding your first flippable home, including where to look and potential pitfalls to avoid.
Where to Find a Property to Flip
Flipping houses is a popular strategy for generating cash flow in real estate investing. While it can be lucrative, finding the right home to flip can be challenging. Here are some effective ways to locate a property to flip.
Hire a Real Estate Agent
First, find a real estate agent familiar with investment strategies and flipping houses. They should have access to the Multiple Listing Service (MLS), which lists low-cost properties, such as foreclosures and short sales.
Find Your Target Market
Identify your target market to locate potential homes to flip. Look for up-and-coming neighborhoods with features like public transportation, entertainment, shopping, restaurants, low property taxes, and excellent schools. The goal is to find a home needing renovations, then sell it for at or above market value after the updates.
Browse Local Auctions
Homes foreclosed by lenders are often auctioned off. These auctions are public information and can be found online. You'll need cash to purchase properties at auctions, which often offer great prices. Be aware that you may not have time to inspect the home before bidding. Arrive early if the auction allows walkthroughs, or drive by the property for a visual inspection beforehand.
Look for REO Homes
If a home doesn’t sell at auction, it becomes a real estate-owned (REO) property, reverting to the lender. These homes typically require thorough cleaning and extensive repairs.
Ask About Short Sales
In a short sale, a home is sold for less than the mortgage balance when the homeowner owes more than the property's value. These can be good deals for investors, though they often need substantial repairs. Short sales can be found on the MLS.
Other Options
Drive through desirable neighborhoods and look for homes that appear abandoned or in need of repair. Use public records to find the homeowners and send a letter expressing your interest in purchasing their property. Some homeowners are eager to sell but unaware of their home's potential value to investors.
What Issues to Avoid When Looking for a Home to Flip
To find the best deal, look for homes priced significantly below market value, often due to the need for major repairs. However, certain issues can be so costly that they undermine your profit potential.
Structural Problems
Foundation cracks are a major red flag. If you see cracks or shifting in the foundation, it's best to move on.
Electrical or Plumbing Overhauls
While minor electrical or plumbing issues are expected, replacing entire systems can be prohibitively expensive. Outdated wiring or significant water damage are signs to consider another property.
Significant Mold
Small patches of mold are usually manageable, but widespread mold issues can cost thousands of dollars to repair.
Final Thoughts
Finding a home to flip is often the hardest part of the process. Avoid homes with significant structural, electrical, plumbing, or mold issues, and focus on properties that primarily need cosmetic repairs. Once you find the right home, you're on your way to building wealth through real estate investing.
