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April 1, 2022

A Beginner’s Guide to House Flipping and Pre-Inspections

A Beginner’s Guide to House Flipping and Pre-Inspections

If you’re looking to make some extra money, buying a fixer-upper can be a profitable choice if you know how to invest your money wisely. When house flipping, there are many vital things to consider before you start the sometimes long and arduous process. Whether it’s your specific real estate market or that the home needs serious upgrades, every house flipping move you make can affect the home’s bottom line and asking price. Read on for a helpful guide that features some house flipping tips and things you should know about getting a pre-inspection before the home goes up for sale.

What is House Flipping?

The concept of “house flipping” is that you purchase a home with a short holding period and the intention to resell it quickly. While most homeowners buy real estate as a long-term investment, the act of house flipping provides you with a faster way to make money after the initial purchase takes place. This short-term real estate transaction lets you leverage your asset to earn money once the flip is complete and the home sells. Many investors look for homes that require basic updates and repairs at a low cost. Like most other investments, the idea is to “buy low” and then “sell high” after the changes are complete. While house-flipping can certainly be lucrative, it’s important to point out that there are never any guarantees because the real estate market is in constant flux.

How to Get Started?

If you’re interested in house flipping, there are some basic things to keep in mind, and each of these will play a role in determining whether you’re making a smart investment.

The House Flipping 70% Rule

The 70% rule of real estate investing should serve as your guide when you look for a home to flip. The rule states that you shouldn’t pay more than 70% for the house after the repair value minus all repair costs. The ARV or after repair value refers to the home’s estimated value after all of the repairs and upgrades are complete. For example, if the house has an ARV of $100,000 and needs $25,000 worth of repairs, the rule suggests that you should pay no more than $45,000 for the home. This gives you about 30% wiggle room to pay for miscellaneous items like minor repairs and other costs, and also accounts for the amount of money you’ll profit when the home sells. Here’s an example of how the 70% rule is calculated:

ARV of $100,000 x 70% = $70,000 – $25,000 = $45,000

The Importance of Ceiling Value

Once you’ve found a home to flip and you’re ready to put it on the market, make sure you understand the ceiling value. This term refers to the maximum asking price for which you can list the home. Many state or local governments often mandate this “price ceiling.” And, if you ask too much for the home, it could sit unsold for an extended period of time, resulting in more buyers being hesitant to make an offer. Always speak with a local, experienced real estate agent who can help you come up with a fair market value. You can always start by listing the house for a little more since you can negotiate the final price down with potential buyers later.

Structural Improvements to Consider

Even if the home you buy looks like it’s in excellent condition, there are some crucial upgrades you should consider. For example, if it’s an older home with knob and tube wiring, it’s definitely recommended that you do a complete electrical upgrade. Hire an inspector to look at the plumbing to determine if there are signs of rust, wear, or damage. The insulation in the home should be in good condition, and it should feel like it’s at a comfortable temperature when you run the HVAC system. Check the roof to ensure it’s in good condition with no signs of leaking, missing shingles, or other damage. It’s always a good idea to inspect the main components and systems of the home first to determine which improvements are most important and necessary.

Room by Room Renovation Guide

Here are some suggestions to help you renovate each room of your house flip to get a higher asking price.

Adding the Most Value

Most homebuyers today want to spend their money on unique properties. To add the most value to your house flip, make updates that appeal to younger buyers and modern families. A sleek glass railing along a staircase can be a contemporary alternative to a traditional handrail. Install some high-tech upgrades like a smart thermostat, security camera system, and a doorbell alarm camera. An updated garage door with frosted glass panels can make the home look modern. If the windows are old, install new energy-efficient windows so that the house looks new. This is also a great incentive for buyers. If you have room in your budget, consider installing a new deck or covered patio since many buyers enjoy spending time outdoors.

Selling the Flip

After all of your upgrades are complete, it’s time to put your home on the market. Make sure you hire an experienced, qualified real estate agent who knows the local market well. Ensure that your listing includes essential details like the square footage, special features that make it unique, and the significant upgrades you’ve made. Hire a professional photographer to take beautiful, detailed pictures of every room as well as the outside of the home. The right marketing plan will make it easy to sell your flipped home quickly for a profit.

The Importance of a Pre-Inspection

You should never buy a home to flip before hiring an experienced inspector. A pre-inspection helps you determine whether the property is worth the investment, and it gives you a clearer picture of the upgrades and repairs you’ll need to make.

Inspection Checklist

Here are a few key items to include in your pre-inspection:

Minimize the Risk

Getting a pre-inspection before buying a house to flip can minimize your risk of losing money. Here are a few things to keep in mind that may help keep your risk as low as possible.

The Most Common Home Inspection Findings

Here are some of the most common things that inspectors find when inspecting property:


A home inspector will make some recommendations for repair. Use these recommendations to help you determine whether or not investing is worth it. Here are some of the recommendations your inspector may make:

If you’re looking for ways to make money on a house flip, be sure to keep the tips from this guide in mind. House flipping can be a great way to make money quickly if you plan ahead and do your research. With a quality pre-inspection, you’ll have peace of mind knowing whether or not the property you’re interested in is worth the cost.

Photo credit: Master1305

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