An In-Depth Guide for Buying and Flipping Homes Without Cutting Corners

Learn What it Takes to Buy a Fixer Upper

Whether you’re fixing up your current starter-home or renovating a new property to sell, buying and flipping homes is a smart way to increase property value and generate income. But without a solid plan and budget, you might fall into a money pit. We’re here to help make buying a fixer upper as smooth as possible.

We spoke to a Cleveland home renovation and planning expert – Steve Lorenz, Executive Director of Kamm’s Corners Development Corporation – to find the most valuable upgrades to a home and what it takes to flip properties the right way.

First, What Is House Flipping?

Flipping houses is a popular real estate investment strategy that involves purchasing a property, modernizing it and selling it for a profit. Most homebuyers are looking to purchase a move-in ready home. House flippers improve properties to the point where they meet buyer demand.

Keep in mind, renovating a home goes beyond making an income – house flippers have the potential to make a big impact on the neighborhood.

“Our first motivation isn’t profit – it is to take an ugly house and make it into a really nice-looking house to increase the comps in the neighborhood, then sell it to someone who’s going to pay taxes, make payments and better the community. Our mission is a little broader than just someone looking for a cheap house in the neighborhood that they can make a buck on.”

Steve Lorenz | Executive Director, Kamm’s Corners Development Corporation

Wondering if flipping houses is worth it? Let’s go over how to buy a fixer upper.

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5 Steps to Buying a Home That Needs Renovations

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Jump To:

Set a Budget | Find a Fixer Upper | Set a Timeline | Renovate the Property | Hire a Realtor

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1. Set a Budget for Flipping the House

How Much Money Does It Cost to Flip a House?

The most important step to home flipping is establishing a budget. Along with the purchase price of the property, you’ll also need to factor in the rehabbing costs.  According to Lorenz, houses his team purchases in the Cleveland area typically cost a few thousand dollars. Then, they spend $75,000 to $100,000 to transform the property. Of course, this total number can range drastically depending on the current condition of the home, your region and the state of the market.

“We try to really make our houses one of the best on the street, and sell them at the top of the market to help other people with their own evaluations to bring up the comps.  It raises all of the boats, not just that particular house.”

Steve Lorenz | Executive Director, Kamm’s Corners Development Corporation

A home in need of simple cosmetic fixes can considerably improve your return on investment, while extensive work like a new roof or complete gut jobs can sky-rocket your expenses. Kitchen and bathroom renovations are very common projects that house flippers tackle – we’ll cover those in a bit.

“From a financing side, we’ll go to the bank and say here’s the house, here’s what we think we can sell it at,” Lorenz said. “Once we make $100,000 worth of improvements, we think we can sell it for $150,000. And they’ll give us a mortgage for about 75 percent of that cost, which is kind of like a mortgage line of credit. So, we have to put in some of our own money, but most of it is financed through the bank, so when we sell the house it is paid off.”

What Is the After-Repair Value?

The ARV is the sum of the home’s sale price plus the total cost of repairs. 

To start budgeting, check out similar homes in the area. Research how much comparable properties sold for. This will give you a good estimate of your home’s value once repairs are completed and the best price to bid on a property.

Here’s an easy ARV formula to remember:

ARV = (Property Purchase Price) + (Renovation Costs)
 

Keep in mind that you’ll also want to factor in a little wiggle room for unexpected repairs, advertising and other costs.

“We always have a 15 percent contingency on our projects. We’ve figured out over the years that we typically use about 10 percent of that. We always know that there will be stuff that comes up, so we’re ready for it,” Lorenz said.

2. Buy Your Fixer Upper

Finding a fixer upper home is the first major hurdle. To find the right property for you, do your research on the history of the home and surrounding property values. Depending on your budget, you might be looking for a cosmetic fixer – a home that is structurally sound, but just needs a makeover. From bad smells to outdated décor, some properties only need a little TLC to attract new buyers.

If you have more money in your budget devoted to renovation costs, you may be able to tackle larger projects like roof replacement or a new furnace and duct work. 

In either case, make sure to hire an experienced home inspector. Their insight can help to keep you from getting in over your head with unexpected repair costs, like foundation troubles or asbestos removal.

3. Set a Project Timeline

After you find a fixer upper that fits your budget, set a realistic timeline for repairs. You don’t want to rush through the jobs, because that can compromise the overall quality of your home. And keep in mind, prospective buyers can find the closing date and sale price of your property in public records. A quick turnover at a much higher rate can deter well-researched buyers. 

“Some flippers come in and buy a house for $10,000 or $12,000, put $15,000 into it and try to sell it for $60,000. They’ll do a really low-level job on it, then work with a mortgage company where they get someone into a house that really shouldn’t own a house. So, it’s really more of a predator situation than it is a neighborhood revitalization initiative.”

Steve Lorenz | Executive Director, Kamm’s Corners Development Corporation

 

4. Start Renovating the Property

Time to get to work! Next, you’ll need to decide which repairs the home needs and how these projects will factor into your budget. Focus on the improvements that add the most value to a home and prioritize those. This plan may include a combination of cosmetic, moderate and extensive repairs. To plan which projects to tackle, you may want to consult with reputable contractors, realtors and interior designers in your area.

“We talk with interior designers about the current trends and what kind of kitchen to put in. We speak with realtors about whether we need to open up rooms to make it more open-concept, whether we should add a second bathroom to make the sale price better and what the market price would be. “

Steve Lorenz | Executive Director, Kamm’s Corners Development Corporation

Need ideas on where to start? Check out this guide for home remodeling ideas.

Modernize the Space

When flipping a house, your main objective is to make the property inviting and livable. From entry ways and living rooms to bedrooms and basements, you want the space to feel fresh and new. Here are a few common cosmetic renovations that will please prospective buyers:

• Remove old wallpaper.
• Refinish wood flooring.
• Get rid of wood paneling or paint over it.
• Install new doors and hardware.
• Replace light fixtures with energy-efficient models.
• Tear out old carpet in family rooms and bedrooms.
• Replace basement windows with glass block.
• Patch and paint walls throughout the home.

Not sure if you should tackle these renovations yourself or hire a professional? Check out our guide: Which Home Improvement Projects Can You DIY? 

Remodel the Kitchen

The kitchen is a major selling point. Modern appliances, neutral color palettes and an open-concept are popular kitchen trends many buyers are looking for. To save money on renovation costs, some house flippers choose to tackle demolition work themselves, then hire a contractor for installation. Here are some kitchen renovation projects to add to your list.

• Replace sink and faucet.
• Get rid of old appliances.
• Install new cabinets or paint them.
• Tear out old countertops.
• Update hardware on cabinetry.
• Rip out linoleum flooring that is peeling or outdated.
• Put in a new range hood.

Ready to pick up the sledgehammer? Let us walk you through how to demolish a kitchen top to bottom. 

Renovate the Bathroom

After the kitchen, the bathroom is the next biggest attention-getter. While bathroom remodeling costs can add up quick – especially if you rearrange plumbing – it is possible to get it done on a budget. Add these items to your fix and repair checklist to flip your home fast.

• Get rid of outdated tile. 
• Hang new bathroom mirrors.
• Install a new sink and vanity.
• Put in water-efficient toilets.
• Freshen up caulk and grout.
• Remove the old bathtub.
• Convert your tub into a walk-in shower.

If you’re DIYing this step too, bookmark our complete guide for demoing your bathroom from top to bottom. 

After completing all of these renovations, you’ll have a turn-key home that will not only sell quickly, but help to increase the property value of other homes on the street.

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5. Hire an Experienced Realtor

After you’ve finished the dirty work, it’s time to stage the home to sell. Hiring a qualified realtor is generally the best way to market your home. Aside from handling paperwork and showings, a successful agent can network within the industry and negotiate offers to find the best buyers at the best price. And if you plan to flip more properties, it’s great to build a relationship for future listings.

Ready to Flip Your First House?

Renovating an entire home is a big project – but we hope these house flipping tips help you to take it one step at a time. We rent construction dumpsters to people flipping homes all the time – even on TV.  We worked with Bravo’s Buying It Blind to help six couples buy and flip the home of their dreams. We’d be happy to help you out too with a free quote.

Looking for more DIY tips and tricks? Check out the For the Home section of our blog for more inspiration.