“Flip This House,” “Flip That House” and other home-flipping reality-TV shows went dark when the housing boom went bust.
But home flippers—investors who buy a property, make some repairs and sell it quickly in hopes of a profit—never really left the scene.
Now the housing market is back and the flip is on. Sales of new homes in May rose to the highest level since July 2008, according to Commerce Department data. The Standard & Poor’s national housing price index, which tracks existing home sales in 20 major markets, was up 12.1% in April compared with a year earlier. That’s the biggest gain the index has recorded since it started in 2006.
We checked in with three experienced home flippers to find out how they got their start, why they do it—and what you need to know about the ins, outs (and ups and downs) of flipping.
Rule of Flipping #1: Find the Sweet Spot
Rob Berger, 46, works as an attorney in Columbus, Ohio, by day, and a home flipper by night. He’s been doing it since 2005, when he and his high school best friend started investing in real estate as a means of diversifying their portfolios.
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They also go in on deals with Berger’s sister, who owns a home design business and is easily able to oversee repairs, which saves them cash and boosts their profitability.
Their latest flip is a three-bedroom, one-bathroom house in Columbus, and he estimates that, all together, the trio will make $110,000 after the house is sold, a profit of nearly $37,000 each, “which isn’t bad for a three-month effort,” says Berger.
The crew bought the house in February and plan to sell it this month. They evaluated it in much the same way they would if they were buying a home for themselves. “We liked the property because we know the area, it’s in a good school district and the price was right,” Berger says. They have since gutted the bathroom and kitchen, replaced the exterior siding, painted and added new doors and fixtures.
Berger’s no. 1 rule of thumb? “Never overimprove a house.” He aims to find the “sweet spot,” he says, “where you can get a good price on the sale, without overspending on the renovations.”