It is possible to make one million dollars a year flipping houses, but it takes a lot of work and planning. Fix and flipping homes is a great way to make money, but you can also lose money if you don’t do your homework. I have from 5 to 12 fix and flips going at once and I have sold 11 fix and flips already in 2016 (August). I most likely will not make one million dollars flipping this year, but I hope to at some point. Fix and flipping has been a great additional income source for me, but it takes patience, hard work and time to build up your business.
I have written articles on how to make one million dollars as a real estate agent and how to make one million dollars with rental properties. I like to think big! Not only do these articles help others realize what it takes to make one million a year as an agent or investor, but it helps me plan out how to do it myself. My plan to purchase 100 rentals properties, was an article I wrote over a year ago and it has been an awesome goal and motivator for me.
How much money can you make flipping houses?
I have flipped homes for well over ten years and I have learned a lot over the years. When I flip a house I do not make huge money with every deal and it is not easy to build a business model that is profitable. I average a little over $30,000 in profit on each fix and flip. The typical deal I usually flip will be bought for around $80,000, would need about $15,000 in work, have about $15,000 in other costs and sell for $140,000. It is important to remember that many costs involved in flipping homes besides the repairs that need done. My typical deal leaves me a profit of about $30,000, but profits vary with cheaper houses, more expensive houses and houses with less and more work needed. I did a case study on a flip I did earlier in 2014 that profited me $50,000. That flip was bought for $76,000 and sold for $175,000 but because it needed $40,000 in repairs I only profited $50,000. I say “only” because there was such a huge margin between the buy and sell price, not because I think $50,000 is a small profit. I would love to make that much on each fix and flip!
It is possible to make more money on each flip, but very rare in my experience. There are a lot of investors looking to flip houses in my market and that makes it tough to find awesome deals that will net $50,000 or even $30,000. The houses that I made $50,000 on, had major structural problems that scared away most buyers. A support wall was taken out and the entire ceiling had dropped three inches in the living room. We had to completely rebuild the roof and there were many unknowns. I have flipped close to 100 houses and twice I have made over $100,000 on a single flip. Both times I made $100,000 on a flip, the houses were country properties with acreage and had to be bought with cash at auction. There was a lot of risk on both deals, but they worked out great. I still don’t know why the other investors in the area let me buy those homes so cheap!
Here is an article with more details on how much money you can make fix and flipping homes.
How much money do you need to flip a house?
Not only is it hard finding deals you can fix and flip and make a profit on, it is hard to get the money together to fix and flip. I have a great relationship with a local bank, but I still have to put 25 percent down when I buy a house and pay for all the carrying costs and repair costs.
When I buy a house for $80,000 I have to put $20,000 down plus pay closing costs. I have to pay for repairs out of my pocket and the carrying costs until the house sells. On a typical deal I will have around $45,000 of my cash into a low-priced flip.
Down payment: $20,000
Closing costs: $2,000
Above are the numbers for the cash I would need on a house I bought for $80,000 that needed $15,000 in work. The cash total comes to $41,500, but something always pops up that I was not planning on. Usually it is a repair that was not seen or could not be known about until the repairs were started. Here is an article with more details on the costs to flip a house.
Here is an article that discusses the different financing options for a fix an flip. It is possible to find hard money loans that let you put less money into a flip, but your rates and costs will be much higher.
How long does it take to sell a fix and flip?
I had ten fix and flips going for months this year until I recently sold one. When you have a lot of fix and flips going at once, it takes a lot longer to complete the process of flipping a home. If I had one fix and flip or two at a time I could turn them in about four to six months.
When I flip a home it takes at least one month to fix them in most cases, two to four weeks for the home to be on the market before we get a contract and one month to close a deal in a perfect situation. That timeline adds up to three months, but it always takes a longer than the perfect scenario. Many times it takes a couple of weeks for the contractor to start work, sometimes we have to send the contractor back to make more repairs or fix something they missed. It could also take longer to sell a house if we have it priced too high or a contract falls apart.
In reality it takes me over six months to complete a flip, because I have so many going at once. I have five good contractors working on my properties and I am still behind! Out of my nine current flips, two are on the market and under contract, four are being worked on and three are sitting there waiting for a contractor to start work (The fifth contractor is working on rental number 11). I have a couple of properties that will be held for almost nine months, because it has taken me so long to find contractors. Earlier this year I did not have five contractors, I had two and it took me time to find more contractors that I trusted, were reasonably priced and worked quickly. I trying very hard to shorten my time frame for turning these properties because the faster I sell them, the more I can buy and the more money I will make. I should be able to buy, repair and sell my flips much quicker now that I have theses contractors in place.
Here is a great article that discusses the time it takes to flip in much more detail.
How do you find properties to fix and flip?
I am in Colorado and our market is extremely competitive. Prices have risen 20 to 30 percent over the last couple of years and there is very low inventory. Investors are all over the place looking for deals and many have given up on the MLS. I have not given up on MLS; eight out of the nine flips I have we’re bought off the MLS How can you buy flips off the MLS when there is so much competition and so little inventory? Here are some quick tips on how I get deals off the MLS.
- Become a real estate agent: I can view a house and make an offer within hours of it being listed.
- Check MLS ten times a day: this is easier for me because I am an agent. I literally check the MLS or new listings and listings that have come back on the market five to ten times a day.
- Look for aged listings: this tactic has not worked well lately because the market is so hot. In the past I would look for decent deals that were listed for over 60 days and make a low offer (20 percent below list)
- Look for auction properties: I use to buy 90 percent of my flips at the trustee sale. Now I buy none because the competition has gotten so crazy there. It is still a good idea to check out foreclosures sales in your area. Also look for auction sales on REOs.
- Be willing to do repairs: almost all of my flips need from $15,000 to $40,000 in work. To get good deals you have to buy houses that need work.
- Act fast: I mentioned being an agent lets me act fast, but when I do find a deal I also make a decision right away. I don’t wait a day or even half a day, I write offers as soon as possible.
- Find a great real estate agent: if you aren’t an agent find a great agent who will act fast for you.
How much money am I making on my fix and flips?
We have gone over the basic costs and time frames on flipping for my business model. But what about making one million dollars a year flipping houses? I have sold six flips so far in 2014 and I have two more under contract set to close this month (October). I have three more properties that will be competed this month and should close this year as well. That will bring my total closed flips to 11 in 2014. I have another flip that will be finished the end of October and it might close before the end of the year, but I am not going to count on it.
The average amount I have made in the past and what I will make on my current flips is just over $30,000 on each property. If I sell 11 flips in 2014 I will have made $330,000. When I calculate the profits on my flips I don’t count the commission I make when I buy the property as an agent. Ten of those properties I bought on MLS and I made a commission when I bought them that totaled somewhere around $30,000 for all the properties. Including the commissions I will make about $360,000 from my fix and flips in 2014, which isn’t bad but it is not one million dollars.
How many flips would I have to complete to make one million dollars a year?
At my current profit margin I would have to flip just over 30 houses a year to make one million dollars. That is a lot of houses to flip, but many investors flip that many houses or more every year. I heard an investor speak at a conference that flipped over 1,200 homes in one year! It is not easy to jump from 11 flips a year to 30; there are many things I would have to change with my business model to flip that many houses.
How much money would I need to invest to make one million dollars flipping?
I need at least $45,000 in cash on each flip, however many times I need more. If a house needs more repairs or is more expensive I will need more cash and in some instances I will need less. I will assume I need $55,000 cash for each flip I purchase. I have some private money and a line of credit on my rental property that is paid off. That money totals $280,000, but for 10 flips at $55,000 a piece I need $550,000 in cash. That leaves me using $270,000 of my money to invest when I have ten flips at once. If I had 30 flips I would need a lot more cash.
How many fix and flips would I need at one time to make one million dollars a year?
I am averaging over six months per flip from the purchase date to the sale date. However, I know I could flip houses faster with more contractors and better systems. I will assume I will be able to compete fix and flips in 6 months or less from now on. That would mean I would have to have 15 fix and flips going all the time to flip 30 houses a year.
If I have 15 houses at any one time, I would need to have $775,000 in cash ($55,000 per property). After deducting my line of credit and private money, I would still need $495,000 in cash. I could find more private money or get a partner if I wanted to expand my operations. I don’t want a partner because I would have to share my profits and lose the ability to make all the decisions. But I may look into getting more private money to fund my fix and flipping.
How hard would it be to finance 15 flips at once?
My portfolio lender has a great program for my flipping business. However, they limit my total borrowing ability to $750,000 for my fix and flips. I am very close to that limit and if I had 15 flips at once I would need to borrow at least $1,000,000. I would have to change the deal with my bank and hope they would go for it if I wanted to flip 30 houses a year.
Could my contractors handle 15 flips at once?
Another issue I would have with completing 30 flips a year and 15 at one time is finding enough contractors. I have five contractors who are doing a great job for me now. But, I am not their only customer and it takes at least 30 days to finish the repairs on most of my flips.
If I kept my current contractors and they only worked on my properties, they could complete five flips in one month, five the next month and the final five in the next month. That assumes I buy all fifteen flips at once. For me to flip 30 houses in a year I only need to buy two and a half flips every month. That means if I spread out my fix and flip purchases I could get by with five contractors. Technically if all five contractors worked for me and they completed one flip a month they could complete 60 in one year. I still have my plan to buy 100 rental properties and I will need contractors to work on those properties as well before they are rented. If I planned everything perfectly I could probably get it all done, but that rarely happens so I made need to find even more contractors!
Could I find enough deals to make one million a year?
The biggest challenge when flipping homes is finding great deals. I have always been able to find deals in the past; whether it be through auctions, MLS or direct marketing. However, I have never bought two and a half deals every month. To meet my rental property goal I need to buy at least 6 houses a year and that means I need to find three great deals every month.
I go out about 40 miles to look for fix and flip properties, but I keep my rental properties within 10 miles of me. If I want to find more deals I will have to expand my territory on flips, which is risky. The farther away I get from my market, the less familiar I am and the bigger the chance I make a mistake. I would still be okay with expanding my territory a little bit to find more deals.
I think there is still opportunity to buy at the foreclosure sale as well even though I have not gone to the sale for months. If foreclosures start to increase or a couple of investors stop buying or move that could bring more opportunity at the sale. If I have trouble finding flips with other methods, I will go back tot the foreclosure sale.
Since I have had ten flips the last few months I have not been actively looking for deals. If I actively looked for deals twelve months a year I could get at least a few more deals a year and probably more. If I really put my mind to it and worked hard I think I could find enough deals to buy 30 flips a year and continue to buy rental properties.
What if I bought more expensive flips to increase my profit?
Another option to make one million a year is to increase the purchase and sale price of my fix and flips. There is a lot of risk involved with buying more expensive flips and I would expect much more profit per deal. A more expensive flip takes a larger down payment, more interest charges, more carrying costs and usually takes more repairs. The more expensive a house, the nicer it has to be and the more expensive the remodel is. The more expensive flips also take longer to sell, because there are less buyers in the higher price ranges.
If I buy more expensive flips I want my profit percentage to be similar to my lower priced flips. If I make $30,000 on a house that costs me $80,000; I want to make $60,000 on a flip that costs me $160,000. The problem with those profit margins is they are hard to find. Flippers in my area are still content to make $25,000 to $30,000 on a fix and flip that costs them $160,000 or even $200,000.
In my experience I usually don’t make as much on a higher price flip to justify the extra costs and risks involved. I have made over $100,000 on two flips in 13 years, but those deals are not readily available and in my opinion were flukes. Over the years I have figured out the lower end properties make more money in my market for flips. I will not pursue higher prices properties.
What would I have to do to make one million a year?
After analyzing my situation and what it would take to make one million dollars a year fix and flipping homes I realized it is possible. It would take a lot of work and some changes to my business model, but it’s doable. Here is a break down I what I would have to do.
- Save more money for fix and flipping or find more private money. If I were to take all the profits from my current flips and save that money, I would have close to enough after taxes.
- Lower my turn time to 6 months or less per fix and flip. If I do that with ten flips at a time I could flip 20 houses a year, which would greatly increase my income, but still leave me short of one million. Now that I have five great contractors I can lower my turn time to six months, but another great contractor might be needed to reach 30 flips a year.
- I would have to ask for more money from my lender to finance 15 flips at one time. They may or may not do this, I have not asked them about raising my limit yet.
- I would have to expand my flipping area and work non stop all year looking for deals. I think it is possible to find 30 flips a year, but it would be tough. It also might take time away from my rental properties or real estate business, causing them to suffer. If I make one million a year from fix and flipping it would be worth it.
I think it is possible for me to flip 30 homes a year and make one million dollars. Whether I want to or not I have not decided, because I still want to have plenty of time with my family, my real estate team is doing great, my rental properties are doing great and I love writing for Invest Four More. I am not sure I could continue doing everything I am doing now and flip 30 houses a year. I do want to continue to grow my flipping business and flip more houses each year. Who knows eventually maybe I will get to 30 flips a year and make one million in one year from flipping.