It is possible to make a million dollars a year flipping houses, but it takes a lot of work and planning. Turning houses over is a great way to make money, but you can also lose money if you don’t do your homework. I have 5 to 22 flips at a time and have sold more than 20 flips each in the past three years. While I flipped a lot of houses (nearly 200), I never made a million dollars flipping in a year. The math seems pretty straightforward to making that much money, but there are a lot of problems that come up with trying to make so much business.
How much money can you make
It is possible to make a lot of money flipping houses. In the past, I’ve made an average of more than $ 30,000 in profit on my flips. However, at this point I made fewer flips than I do now. There are many costs associated with flipping houses, and while it is possible to make $ 30,000, $ 40,000, or $ 50,000 on a single flip, it’s harder to consistently make that much money as you get more projects off the ground.
You may see ads or data that say the average profit from a house flip is $ 60,000 or more. The truth is that the number is not accurate. The number is simply the selling price of a home minus the buying price. The number is taken from all sales made in the United States and does not account for repairs or other charges. That would be fantastic if the average house flip profit was $ 60,000, but that’s not the case.
It also takes time to turn a house over. I have an average of 6 months from buying a Flip to selling it. If you are able to do one flip at a time, it means you could make $ 60,000 a year if you are able to make $ 30,000 with each flip. To make a lot of money flipping houses you need to scale and be able to do more than one envelope at a time.
If you do the math, you need to turn over about 34 houses a year to make a million dollars, assuming you make $ 30,000 on each turn. As I said earlier, making that much money on every flip isn’t easy as you grow.
How much money do you need to turn a house over?
Not only is it difficult to find deals that you can make a profit on, but it is also difficult to raise the money. I have a great relationship with a local bank, private lenders and hard money lenders, but I still have to use my own money on every deal I make.
I finance real estate in different ways with different down payments. The following video shows what each of these options cost:
For a flip that costs $ 100,000, the cost could be:
- Purchase price: $ 100,000
- Repairs: $ 30,000
- Shipping cost: $ 5,000
- Purchase cost: $ 3,000
It would take you roughly $ 140,000 to flip this house, assuming you paid all of the cash. There would be selling costs as well, but these are paid when you sell the home and are not an out of pocket expense. When you fund the flip, you can get a loan to cover many of these costs. You might just need $ 20,000 with hard money or $ 50,000 with a bank loan for flips. It is very difficult to flip houses without using your own money. It is possible … but very difficult.
How long does it take to sell a flip?
When I flip a house it takes at least a month to fix it, two to four weeks for the house to be on the market before we get a contract, and a month to close a deal in a perfect situation. In a perfect world, it takes us 3 months to turn a house, but things almost never go perfect!
In reality, it takes me more than six months to complete a flip because so many are running at once. My contractors can’t start a flip right away. So it can take a month or two for the job to even start. It would also be fantastic if each job only took a month, but it often takes longer. Sometimes it also takes longer to sell a Flip. In total, it usually takes at least 6 months to turn a house.
That means if I want to turn 30 houses a year, I have to have at least 15 at a time. I actually had up to 22 at a time, but we never flipped 30 houses in a year – 26 was our best, and we did that twice. The problem with so many houses running at the same time is I don’t have enough people to fix them all and we end up holding them for even more than 6 months!
How hard is it to find a house to turn around?
I’m in Colorado and our market is extremely competitive. Investors everywhere are looking for deals and many have given up on MLS. I still buy houses from the MLS as well as wholesalers, auctions, direct marketing, FSBO and more. There will always be deals, but that doesn’t mean it’s easy to find 30 deals in a year!
Even so, it is possible to find so many offers and more. In fact, I bought more than 30 properties in the previous year. My goal was to turn 36 houses over in several years and while we never did that many, we did 26 in several years.
One problem I ran into trying to flip so many houses over was that I started stretching the numbers to make more stores work. I bought houses with lower and lower profit margins and made less and less money. I lost money on some houses. If you turn over a lot of houses, the costs go up! You need to make sure that your profit margins stay high or even higher than if you were doing less business.
Here are some quick tips on how to get quotes from the MLS:
- Become a real estate agent: I can look at a house and make an offer within hours of it’s listed.
- Check MLS ten times a day: It’s easier for me because I’m an agent. I literally check the MLS or new listings and listings that come back on the market five to ten times a day.
- Look for Aged Entries: This tactic hasn’t worked well lately because the market is so hot. In the past I have looked for decent offers that have been listed for over 60 days and made a low offer (20 percent below the list).
- Search for auction items: I used to buy 90 percent of my flips in escrow. I’m not buying any now because the competition there has gotten so crazy. It’s still a good idea to check out foreclosure sales in your area.
- Be ready to make repairs: Almost all of my flips require between $ 15,000 and $ 40,000 of work. To get good deals, you need to buy houses that need work.
- React fast: I mentioned that as an agent I can act quickly, but when I find a deal, I also make an immediate decision. 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’re not an agent, you can find a great agent who will act for you quickly.
How Much Money Do I Make Flips?
We went through the base cost and timeframe for flipping my business model. But what about a million dollars a year turning over houses? The simple math says you have to flip 34 houses and make $ 30,000 for each house. Here’s the problem with that math.
- With so many houses flipping over, it is really difficult to get them fixed quickly. The longer the repair takes, the higher your costs. You have more transportation and financing costs. The profit decreases with every business.
- If I do a lot of flips, I can’t do everything myself. I also have a project manager, accountant and other help. Not only do I have the cost of the flips, but the cost of people and even an office.
- When you do so many flips, it’s easier to miss things and not spot mistakes quickly. We tend to make more mistakes because there is so much going on.
The more flips we make, the lower our profit margin. While it seems like we could do 34 flips with a profit of $ 30,000 each, it is not. If we do a lot of flips, the profit margin is more like $ 20,000 or even less. That means you have to do 50 flips!
What if I bought more expensive flips to increase my bottom line?
Another way to make a million a year is by increasing the buying and selling price of my fixes and flips. There are many risks involved in buying more expensive flips, and I would expect a lot more profit per deal. A more expensive flip will require a larger down payment, more interest fees, more transportation costs, and usually more repairs. The more expensive a house, the more beautiful it has to be and the more expensive the renovation. The more expensive flips also take longer to sell as there are fewer buyers in the higher price ranges.
When I buy more expensive flips, I want my profit percentage to match my cheaper flips. If I make $ 30,000 on a flip that costs me $ 150,000, I want to make at least $ 60,000 on a flip that costs me $ 300,000. It’s harder to find those high margins, even in higher priced homes.
I’ve made more than $ 100,000 flips three times in my career, but that has been over 15 years. These offers don’t happen very often! I think that if you take on the high-end flips, you are preparing for a much greater risk. You could do ten flips with a profit of $ 100,000 each and hit $ 1 million a year. You would most likely have to be in a very expensive market that supports a lot of higher priced sales.
I think it’s possible to make a million dollars a year flipping houses, but it would take a lot of work and some really good systems. I think you’d have to turn more houses than you think because of all the additional costs that come with doing more and more business. I never made anywhere near a million dollars a year, even though I graduated 26 in one year. Will I ever make a million Maybe, and when I do, I will surely write about it.
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