So, you're thinking about diving into the world of house flipping? It's not as simple as those reality shows make it seem, but with the right knowledge and preparation, you can turn a tidy profit. Before you start, it's crucial to understand the ins and outs of real estate investing. While TV shows only give you a glimpse of the process, there's a lot more work that goes on behind the scenes, especially when it comes to managing variables.

The more prepared you are for your first flip, the better your chances of making a profit. As a beginner, you'll need to start by familiarizing yourself with neighborhoods, learning about home repairs and renovations, and building a network of investors, contractors, and designers.

What exactly does it mean to flip a house? In a nutshell, it's the process of purchasing a property (often one that needs some TLC), making the necessary repairs and renovations, and then quickly selling the refurbished home for a profit.

House flipping has become a lucrative industry for many, and a dream for even more. With a solid understanding of real estate, access to funding, and the ability to oversee renovations, you could be well on your way to flipping your first house. Keep reading to learn how to get started as a newbie house flipper.

How to get started flipping houses

To successfully flip a house, there are a few extra steps you'll need to take beyond the usual process of buying and selling a home.

1. Study the market

The first step to becoming a serious house flipper is to know the housing market inside and out. You won't be able to spot a good deal in an up-and-coming neighborhood without a thorough understanding of the area.

Start by researching the real estate market. Find out where people are eager to live and identify any popular housing trends. Partnering with a real estate agent or REALTOR® is key – they'll help you understand market conditions, determine necessary repairs, and time the sale just right.

In fact, many professional house flippers are licensed real estate agents themselves. This shouldn't come as a surprise – if you want to flip houses full-time, you need to be well-versed in all aspects of real estate. You should be comfortable with the process of buying and selling a home, and the juggling act that comes with it.

2. Get to know neighborhood rankings

It's also important to familiarize yourself with the class ranking system that real estate investors use for neighborhoods, from Class A to Class D:

Class A neighborhoods: The cream of the crop, with the highest real estate prices.

Class B and Class C neighborhoods: Middle-class and working-class neighborhoods.

Class D neighborhoods: Areas with the lowest-income housing.

For your first flip, focus on Class B and Class C neighborhoods. They're more affordable and sell faster than high-end homes in Class A, and typically require less extensive renovations than homes in Class D.

When you're working with a real estate agent who knows the area well, you can zero in on neighborhoods with potential that align with your investment strategy. Maybe a Class C neighborhood is about to receive a significant investment from the city, or a major employer or university is expanding nearby. Being aware of these external factors ahead of time can create an opportunity for you to profit.

3. Line up your financing

Before you even think about making a purchase, you'll need to know how much money you need to flip a house. If possible, buy the property with cash. This will help you avoid accumulating debt and paying interest on the house before it sells.

If you don't have the cash on hand to purchase a house outright, you could consider pooling money with friends and family to buy it. There are other ways to finance your flip as well. Keep in mind that most mortgage products aren't designed for house flipping. Banks typically aren't interested in getting involved in the risky business of house flipping. You're going to have to find alternative financing for your flip. The cost to flip a home varies depending on the type of financing you secure, but here are a few options:

Cash-out refinance: If your primary home has increased in value, a cash-out refinance could be an option. With a cash-out refinance, you'll take out the equity in your current mortgage and refinance to what you still owe.

Home equity line of credit (HELOC): A HELOC is a loan that uses the equity in your home as collateral.

Hard money loan: A hard money loan is a short-term loan issued by a private lender. Hard money lenders offer loans that range from 6 months to 1 year, have high interest rates, and can require down payments up to 40%.

In addition to the finances for purchasing the home, you'll need to budget for repairs and renovations. Make sure to account for these expenses, as they can be the difference between a profitable flip and a flop.

4. Seek expert advice

Before buying a house to flip, you need to know what you're getting into. Just like it helps to have knowledge of real estate markets, understanding what repairs are necessary and how much they cost will help you make a smart investment. After all, the houses you purchase to flip are investment properties.

It's a good idea to network with other real estate investors and talk shop. Consult your real estate agent for connections to experienced contractors and reliable inspectors. If you're handy, find out what upgrades you can tackle yourself – but be aware of when you might be in over your head.

Along with budgeting money for repairs, you'll need to budget time. This is especially important if you're taking out a loan to buy the home. Every day that you don't sell the home, you're paying more in interest, insurance, and taxes.

Be prepared for the possibility of something going wrong or taking longer than planned. Not only do repairs take time, but your schedule and those of your contractor or home inspector may not align perfectly. Delays like failed home inspections can cost you serious money.

5. Find and buy a house

Once you've researched the market, secured financing, and are confident you're going to make a smart investment, it's time to find and make an offer on a house. Have your numbers worked out ahead of time with some wiggle room for the purchase price.

When you find the right property at the right price, you need to act fast. Put your money down on a place you believe in. You can't start working on it until you close on it, and you can't close on it until your offer has been accepted.

Depending on who you're buying from, closing can happen quickly – or it can take months. If you're buying from a bank, they're likely ready to close as soon as possible. But if you're buying from a resident, closing may be contingent on them finding a new home.

It's best to have contractors ready to start renovations as soon as the house closes. The quicker you get the work done, the sooner you can put the house back on the market.

6. Sell for a profit

• Hire a real estate agent who knows the market and how to sell your home.
• Take note of comparable house sales in the area, and what sets your house apart.
• Be aware of how long similar houses typically stay on the market before selling.

Selling the house you're flipping is what makes the whole process worthwhile. It's what you've invested all the time and money into. Forecasting the timing and cost of the flip is what's going to determine your profit.