However, one of the biggest mistakes beginners make is working directly with the listing agent of a property they're interested in. For the best real estate information in San Antonio Danny Johnson knows his stuff. He has over 20 years experience real estate investing in San Antonio. Having financing in place allows you to act quickly when a great deal appears, increasing your chances of securing a profitable flip. Before diving into the search for properties, it's essential to refine your investment criteria.
Flipping houses provides invaluable hands-on experience in multiple aspects of real estate, including market analysis, construction, and design. Nationwide, approximately 63% of house flips are purchased with cash, but that still leaves a significant portion of flippers using financing.
This hands-on experience will help you develop a keen eye for identifying profitable opportunities. If you have read it once, read it again.
"It's not as if profits have skyrocketed and investors are thriving-far from it." If renovations are not completed correctly, the investor may need to invest additional time and money to bring the property up to standard before selling.
This requires both analytical skills and a clear understanding of your overall investment strategy. The key is to remain patient, stick to your investment criteria, and avoid letting emotions cloud your judgment. Flipping houses is not a casual hobby-it is a business that can have a significant financial impact, either positive or negative.
For example, if a house is expected to be worth $300,000 after renovations and requires $50,000 in repairs, the maximum purchase price should be calculated as follows:(Formula placeholder for the user to input values)This formula allows for a margin to account for unexpected costs, market fluctuations, and profit. If you approach it casually, you may face serious financial consequences.
If you see it listed at $160,000, it may be worth pursuing as a potential deal. You don't have to be a full-time investor to earn a full-time income.
Their expertise allows them to handle much of the renovation work themselves, saving on labor costs. While experience in real estate, finance, or construction is helpful, beginners can still succeed by leveraging the expertise of professionals.
The most substantial profits in house flipping often come from sweat equity. This is one of the reasons we are able to add so much value to a property in such a short timeframe. By clicking "View All Investments," you can explore our current projects.
Not only does this help address local housing shortages, but it also makes the property more attractive and easier to sell. Don't just skim the surface-dive deep into the details so that you fully grasp how house flipping works.
However, this doesn't mean that profitable flips are impossible-it simply requires greater precision in financial planning, cost management, and market analysis. Once our real estate team confirms that we have a solid investment property, we establish the LLC that will hold the asset, secure any necessary financing, complete all title and escrow documents, and officially close the deal.
Single-family flips are our fastest projects, typically taking between 10 and 14 months. A great starting point is *Flipping Houses Exposed* by Danny Johnson.
Once you’ve identified a strong investment property, the next step is making an offer and securing it under contract. House flipping isn’t about finding any deal—it’s about finding the right deal. Unlike traditional businesses that require inventory, specialized equipment, or employees, flipping primarily requires capital for a down payment and renovation costs.
Jumping into house flipping without research is a recipe for costly mistakes.
In California, the median rental rate for an ADU is $2,000 per month, but in high-value markets like Los Angeles, this can reach up to $4,000 per month. Once construction is finished, we take professional photos of the property, list it on the market, and actively market it to qualified buyers. It's easy to get excited about real estate investing, but success depends on dedication and follow-through.
A formal offer typically includes the proposed purchase price, any contingencies such as inspection and financing clauses, the closing timeline, and the earnest money deposit amount. At this point, you may feel ready to jump into your first flip, but before proceeding, there's one essential question to ask: How will you finance the investment?
House flipping can be one of the most lucrative small businesses to start, and almost anyone can do it with the right mindset and knowledge. Turning a profit in house flipping has become more challenging than in previous years.
While paying cash eliminates the burden of interest payments, it still comes with holding costs and the opportunity cost of having a significant amount of capital tied up in a single project. Many beginners assume they can quickly repaint a house and make a fortune, while professionals understand that flipping is a complex process with tight profit margins.
The most immediate and substantial expense is the cost of acquiring the property. House flipping involves purchasing properties, renovating them, and reselling them quickly. To capitalize on this demand, a key part of our proven house flipping strategy often involves building an ADU on the property.
Even if an investor finds an exceptional deal—such as a deeply discounted foreclosure—understanding which renovations add value and which are unnecessary is essential. To gain an in-depth understanding of the local market, investors should attend open houses, take virtual tours, and meet with real estate professionals.
Even when hiring contractors, investors must stay actively involved in the process. In the first quarter of 2022 alone, 114,706 single-family homes and condominiums were flipped, accounting for 9.6% of all housing transactions in the United States.
This appeals to buyers looking to offset their mortgage with rental income. While cash offers can be appealing to sellers, financing remains a viable option for many investors.
It's crucial to explore your financing options to determine the best approach for your investment strategy. Here are the rewritten paragraphs with the requested changes:Single-family house flips provide the opportunity to enter and exit a deal quickly with a relatively low minimum investment and the potential for high returns. In a neighborhood where homes typically sell for $400,000, purchasing a property for $200,000 and expecting to resell it for $300,000 is highly unlikely.
The strategies and techniques outlined in *Flipping Houses Exposed* by Danny Johnson can help investors maximize their earnings. This ensures that the title is clear, there are no permit restrictions, and there are no structural defects that could impact the renovation process.
S. housing markets in 2025 will be in the South, including Boston-Cambridge-Newton, Massachusetts-New Hampshire, and San Antonio-New Braunfels, Texas.
Real estate investing involves the purchase, management and sale or rental of real estate for profit. Someone who actively or passively invests in real estate is called a real estate entrepreneur or a real estate investor. In contrast, real estate development is building, improving or renovating real estate.
During the 1980s, real estate investment funds became increasingly involved in international real estate development. This shift led to real estate becoming a global asset class. Investing in real estate in foreign countries often requires specialized knowledge of the real estate market in that country. As international real estate investment became increasingly common in the early 21st century, the availability and quality of information regarding international real estate markets increased.[1] Real estate is one of the primary areas of investment in China, where an estimated 70% of household wealth is invested in real estate.[2]
Real estate investing can be divided according to level of financial risk into core, value-added, and opportunistic.[3] Real estate is divided into several broad categories, including residential property, commercial property and industrial property.[4]
Real estate markets in most countries are not as organized or efficient as markets for other, more liquid investment instruments. Individual properties are unique to themselves and not directly interchangeable, which makes evaluating investments less certain. Unlike other investments, real estate is fixed in a specific location and derives much of its value from that location. With residential real estate, the perceived safety of a neighbourhood and the number of services or amenities nearby can increase the value of a property. For this reason, the economic and social situation in an area is often a major factor in determining the value of its real estate.[5]
Property valuation is often the preliminary step taken during a real estate investment. Information asymmetry is commonplace in real estate markets, where one party may have more accurate information regarding the actual value of the property. Real estate investors typically use a variety of real estate appraisal techniques to determine the value of properties before purchase. This typically includes gathering documents and information about the property, inspecting the physical property, and comparing it to the market value of similar properties.[6] A common method of valuing real estate is by dividing its net operating income by its capitalization rate, or CAP rate.[7]
Numerous national and international real estate appraisal associations exist to standardize property valuation. Some of the larger of these include the Appraisal Institute, the Royal Institution of Chartered Surveyors and the International Valuation Standards Council.[6]
Investment properties are often purchased from a variety of sources, including market listings, real estate agents or brokers, banks, government entities such as Fannie Mae, public auctions, sales by owners, and real estate investment trusts.
Real estate assets are typically expensive, and investors will generally not pay the entire amount of the purchase price of a property in cash. Usually, a large portion of the purchase price will be financed using some sort of financial instrument or debt, such as a mortgage loan collateralized by the property itself. The amount of the purchase price financed by debt is referred to as leverage. The amount financed by the investor's own capital, through cash or other asset transfers, is referred to as equity. The ratio of leverage to total appraised value (often referred to as "LTV", or loan to value for a conventional mortgage) is one mathematical measure of the risk an investor is taking by using leverage to finance the purchase of a property. Investors usually seek to decrease their equity requirements and increase their leverage, so that their return on investment is maximized. Lenders and other financial institutions usually have minimum equity requirements for real estate investments they are being asked to finance, typically on the order of 20% of appraised value. Investors seeking low equity requirements may explore alternate financing arrangements as part of the purchase of a property (for instance, seller financing, seller subordination, private equity sources, etc.)
If the property requires substantial repair, traditional lenders like banks will often not lend on a property and the investor may be required to borrow from a private lender using a short-term bridge loan like a hard money loan. Hard money loans are usually short-term loans where the lender charges a much higher interest rate because of the higher-risk nature of the loan. Hard money loans are typically at a much lower loan-to-value ratio than conventional mortgages.
Some real estate investment organizations, such as real estate investment trusts (REITs) and some pension funds and hedge funds, have large enough capital reserves and investment strategies to allow 100% equity in the properties that they purchase. This minimizes the risk which comes from leverage but also limits potential return on investment.
By leveraging the purchase of an investment property, the required periodic payments to service the debt create an ongoing (and sometimes large) negative cash flow beginning from the time of purchase. This is sometimes referred to as the carry cost or "carry" of the investment. To be successful, real estate investors must manage their cash flows to create enough positive income from the property to at least offset the carry costs.[citation needed]
In the United States, with the signing of the JOBS Act in April 2012 by President Obama, there was an easing on investment solicitations. A newer method of raising equity in smaller amounts is through real estate crowdfunding which can pool accredited and non-accredited investors together in a special purpose vehicle for all or part of the equity capital needed for the acquisition. Fundrise was the first company to crowdfund a real estate investment in the United States.[8][9]
Real estate properties may generate revenue through a number of means, including net operating income, tax shelter offsets, equity build-up, and capital appreciation. Net operating income is the sum of all profits from rents and other sources of ordinary income generated by a property, minus the sum of ongoing expenses, such as maintenance, utilities, fees, taxes, and other expenses. Rent is one of the main sources of revenue in commercial real estate investment. Tenants pay an agreed upon sum to landlords in exchange for the use of real property, and may also pay a portion of upkeep or operating expenses on the property.[10]
Tax shelter offsets occur in one of three ways: depreciation (which may sometimes be accelerated), tax credits, and carryover losses which reduce tax liability charged against income from other sources for a period of 27.5 years. Some tax shelter benefits can be transferable, depending on the laws governing tax liability in the jurisdiction where the property is located. These can be sold to others for a cash return or other benefits.
Equity build-up is the increase in the investor's equity ratio as the portion of debt service payments devoted to principal accrue over time. Equity build-up counts as positive cash flow from the asset where the debt service payment is made out of income from the property, rather than from independent income sources.
Capital appreciation is the increase in the market value of the asset over time, realized as a cash flow when the property is sold. Capital appreciation can be very unpredictable unless it is part of a development and improvement strategy. The purchase of a property for which the majority of the projected cash flows are expected from capital appreciation (prices going up) rather than other sources is considered speculation rather than investment. Research results that found that real estate firms are more likely to take a smaller stake in larger assets when investing abroad (Mauck & Price, 2017).
Some individuals and companies focus their investment strategy on purchasing properties that are in some stage of foreclosure. A property is considered in pre-foreclosure when the homeowner has defaulted on their mortgage loan. Formal foreclosure processes vary by state and may be judicial or non-judicial, which affects the length of time the property is in the pre-foreclosure phase. Once the formal foreclosure processes are underway, these properties can be purchased at a public sale, usually called a foreclosure auction or sheriff's sale. If the property does not sell at the public auction, then ownership of the property is returned to the lender.[11] Properties at this phase are called Real Estate Owned, or REOs.
Once a property is sold at the foreclosure auction or as an REO, the lender may keep the proceeds to satisfy their mortgage and any legal costs that they incurred minus the costs of the sale and any outstanding tax obligations.
The foreclosing bank or lending institution has the right to continue to honor tenant leases (if there are tenants in the property) during the REO phase but usually, the bank wants the property vacant to sell it more easily.[12]
Buy, rehab, rent, refinance (BRRR)[13] is a real estate investment strategy, used by real estate investors who have experience renovating or rehabbing properties to "flip" houses.[14] BRRR is different from "flipping" houses. Flipping houses implies buying a property and quickly selling it for a profit, with or without repairs. BRRR is a long-term investment strategy that involves renting out a property and letting it appreciate in value before selling it. Renting out a BRRR property provides a stable passive income source that is used to cover mortgage payments while home price appreciation increases future capital gains.[15]
The phrase was slightly updated in a 2022 Bloomberg News article noting that BiggerPockets added "Repeat" to the end, making it "BRRRR" to describe a real estate investing strategy of Buy, Rehab, Rent, Refinance, Repeat.[16]
According to Lima et al. (2022), in Ireland, the financialization of rental housing, which includes the entry of institutional investors into urban rental housing markets, contributed to structural factors that create homelessness directly by worsening affordability and security in the private rental market, and indirectly by influencing state policy.[17][18] It was found that the history, politics, and geography of the REITs cause the collapse of Irelands market (Waldron, 2018).