August 8, 2025
Simply put, it's buying low, fixing up, and selling high
Transforming a fixer-upper into a profitable sale isn't just a common TV trope. It can be a powerful real investment strategy that can pay off with the right plan, patience, and partners. For many, the appeal lies in the potential for fast returns and tangible results. But like any real estate investment, house flipping comes with its share of risks and requires upfront know-how. Remember, it's not passive income, it's a hands-on hustle.
What Is House Flipping?
House flipping is one way to get started in real estate investing. It is the process of purchasing a property, often one in need of repairs or located in a high-growth area, making improvements, and reselling it for a profit. Successful flippers move quickly, keeping renovation timelines tight to reduce carrying costs. Some finance their flips through savings, but many use hard money loans or other short-term funding to stay liquid, as Groundfloor Lending provides.
What Makes a Good Flip Candidate?
Not every run-down property is a hidden gem. Focus on homes that fall into one of these common categories. Your goal is to find a property with a low cost basis, meaning its value has strong potential to rise significantly from the purchase price, creating substantial unrealized capital gains.
1. Fixer-Uppers in Desirable Areas
These are typically older homes in high-demand neighborhoods. The makeover process requires cosmetic or structural work that can yield substantial returns after renovation.
2. Short Sales and Foreclosures
Distressed sales, like short sales or bank-owned properties, may come at a discount. These sellers are often motivated, and investors can move quickly to secure a deal.
3. Inherited or Out-of-State Properties
When owners inherit a home or live far away, they may be more willing to sell as-is. That presents an opportunity for local investors with time and resources to take on a flip.
Risks of House Flipping
It's not all about profits and Pinterest boards. Here's what can go wrong if you're not prepared.
Overbudget Repairs
Just like you see on those home flipping shows, renovation surprises are real. The need for a brand-new roof or electrical system or other large, unexpected expenses is almost guaranteed, usually depending on the age of the property. Without a solid plan and contingency fund, costs can spiral out of control quickly.
Slow Resale
If the local market cools or you price the property too high, you may have to sit on it longer than planned. According to the Federal Reserve Bank of St. Louis, the average time a home sits on the market can vary significantly based on market conditions, from 53 to 90 days.
How to Get Started in House Flipping
There is seriously much to consider, but if you are ready to dive in here is your basic game plan.
1. Secure Your Financing
House flipping requires capital for both the property purchase and the renovations. As we shared earlier, Groundfloor offers short-term, high-yield loans specifically designed for real estate investors looking to fund projects like house flips.
2. Do Your Market Research
Understanding local trends, comps, and buyer demand is essential. Keep in mind that a great flip in the wrong zip code won't get you far.
There are a variety of data sources house flippers can refer to including dashboards found on consumer focused sites like Zillow and Realtor. You can also reach out to the local Chamber of Commerce or Municipal Planning Commission where the home is located for housing market data.
3. Create a Realistic Renovation Plan
You don't have to make the house perfect, just irresistible to your target buyer. Focus on updates that increase value without over-improving for the neighborhood.
The latter is particularly important. Over-the-top renovations that don’t match the neighborhood’s style or price range can actually hurt your bottom line by turning off buyers expecting something more aligned with the area.
4. Build a Trusted Team
A contractor who stays on budget and hits deadlines is worth their weight in gold ten fold, especially when every day a home remains unsold costs money.
Look for professionals with experience in investment properties, not just general home remodeling. Ask for referrals from other flippers, check online reviews, and don’t skip the step of verifying licenses and insurance. You’ll also want a sharp real estate agent who knows how to price and position a flip.
Tips for a Successful Flip
Flipping a house can certainly be rewarding from a personal and financial standpoint. But it’s rarely as easy and breezy as TV shows make it seem. Your success will depend on smart planning, disciplined budgeting, and knowing when to pivot.
1. Start Small
Your first flip shouldn’t be a major structural overhaul. Stick to cosmetic updates on a smaller property so you can learn the process without taking on too much risk.
2. Stick to Your Budget
It’s incredibly easy to get carried away with high-end finishes, but remember: you’re not designing your dream home. Make every design decision with return of investment (ROI) in mind, and avoid upgrades that won’t translate to a higher resale value.
It's also essential to keep detailed records of all costs, from contractor fees to light bulbs. Even the tiniest of overages can chip away at your margin, so stay organized and monitor your budget in real time.
3. Have an Exit Strategy
It's an unfortunate truth that not every flip will sell immediately. However you can plan ahead by exploring backup options like renting the property short-term or holding it until the market improves. You can even consider living in the home to reserve your resources until a suitable buyer is found. Flexibility can save you from financial stress down the road.
When House Flipping Isn't a Good Fit
Unfortunately, flipping houses isn't a set-it-and-forget-it investment. It requires time, focus, and resilience. If your schedule's packed or your risk tolerance is low, this strategy might not be the best fit. But there's another way to get in on the action.
Invest in House Flipping Without Swinging a Hammer
At Groundfloor, we make it possible to invest in house flipping projects, without doing the heavy lifting yourself. Our platform gives everyday investors access to short-term, high-yield real estate debt investments backed by real property. That means you can help fund flip projects across the country and earn returns, all while diversifying your portfolio.
It's a smart way to tap into the potential of house flipping—no contractor calls, no renovation risk, just data-driven decisions and direct access to real estate-backed opportunities. Get started with Groundfloor's Flywheel Portfolio.
