House Flipping Business Plan Template
Whether you want to start your own house flipping business or expand an existing one, you need a business plan. The following house flipping business plan template lets you know what elements you need to include in a successful house flipping business plan.
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To ensure your house flipping business success in this highly competitive market, you need a properly structured house flipping business plan. With over 12 years of experience, we have helped over 5,000 entrepreneurs create business plans to start and grow their house flipping businesses. Using the following house flipping business template, you can put together an effective business plan for house flipping.
Things to Know Before Writing a House Flipping Business Plan
Home flipping is the act of buying a home, making some improvements, and reselling it. Home flipping is also called wholesale real estate investing.
As the real estate data leader ATTOM report shows, home flipping has gained momentum in the past five years. The share of home flipping sales among all home sales was 5.7% in 2017 which rose to 9.6% in 2022, first quarter.
In 2021, a total of 323,465 homes were flipped.
The profitability of the home flipping industry has been on the decline. The industry earned an ROI of 51.4% in 2017 but the ROI for 2022 first quarter was only 25.8%. On the other hand, gross flipping profit has increased from $65,000 to $67,000. Falling median prices for homes is a contributing factor to this decrease in ROI.
The share of homes flipped with financing is decreasing and flipping with cash is increasing. The home flipping with financing has fallen from 43% to 37% of the industry and house flips with cash share has increased from 57% to 63%.
As of the first quarter of 2022, the most favorable states are Louisiana, Pennsylvania, and New Jersey. For the short term, these states are good for investing in home flipping.
Key Success Factors for the House Flipping Business
The key success factors for flipping homes are similar to the overall real estate investing and brokerage. Let’s see what these factors are and how you can prepare yourself for the venture.
High Investment Business: Real estate investing and home flipping is a high investment business. You will either have to have good savings or a credit line that you can use for investment. A good credit score will also be handy.
Effective Marketing and Promotion: You will need to market your property listings to maximize exposure and attract more clients. You can use realty listing websites such as Zillow, Redfin, etc.
Cost Control on Home Improvement: When you buy a house in a poor condition, you will invest to fix and improve it before you can sell it. You can spend more on home renovations that yield low returns and incur a loss. Carefully see what are the most rewarding home improvement investments that will increase home value and only make those investments.
Home Flipper Expertise: An experienced home flipper makes more money. Your knowledge of the industry directly affects your returns. Invest time and resources in learning the industry, how home services contractors work, how you can increase home value, etc., for better chances of success.
Proximity to Suitable Markets: Not all counties and states are good for home flipping. As the ATTOM report for Q1 2022 suggests, Louisiana, New Jersey, and Pennsylvania offer the most ROI for home flipping. Check the data before you invest.
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What is a House Flipping Business Plan?
A house flipping business plan is a road-map for starting and growing your house flipping business. Your business plan outlines your business concept, identifies your target customers, presents your marketing strategy, and details your financial projections.
Any bank or investor you approach will require a house flipping business plan, so putting one together will be critical to securing funding.
In short, writing a business plan can help you succeed if you’re thinking of starting a house flipping business or pitching to investors or venture capitalists.
Why You Need a House Flipping Business Plan
House flipping business plans can be used to gain interest from potential investors or to secure loans from banks. They are also helpful to you as the owner. A house flipping business plan allows you to thoroughly analyze every aspect of your potential business.
A solid, detailed plan gives you a clear path to follow, forces you to examine the viability of a house flipping business idea, and may help you better understand your company’s finances and competition.
House flipping business owners who have a business plan grow 35% faster than those who don’t, and 75% of fast-growing businesses have one.
A house flipping business plan is a living document that should be updated annually as your company grows and changes.
Free: Business Plan Examples
Do you need help creating a business plan? Check out these six free, proven business plan examples from different industries to help you write your own.
Sources of Funding for House Flipping
Home flipping is a high-investment business. Using your savings won’t be sufficient. Here are some ways to get funding for your home flipping business.
- Commercial Real Estate Loans against your commercial property
- SBA 7(a) loan, or an SBA 504 loan
- Equity Crowdfunding is feasible when you are going all-in for home flipping. You can form a company and offer stocks without being listed on the stock exchange. Investor business needs no accreditation.
- You can get a home equity line of credit (HELOC) if you own at least 20% of the equity in your home.
- Get investment property lines of credit and get a loan against your equity in investment property
- A business line of credit gets you a limit of credit that you can use and pay interest only on the used amount. you can secure such a line of credit with excellent credit and use it for investment.
- You can make a loan arrangement with the property seller and pay in installments. However, the interest rates are higher for such loans.
- Live-in Flip with Mortgage: When you have a stable income, you can buy a house on a mortgage, live in for a few years, make improvements, and sell it again.
How to Write a House Flipping Business Plan
To write a house flipping business plan, you don’t need to be an expert. Our step-by-step guide will show you how to write a house flipping business plan, or you can just download our proven sample business plans to get a better idea. Get house flipping business plan template and sample house flipping business plan pdf here.
The executive summary is the most important part of the document since it outlines the whole business plan. Despite the fact that it appears first in the plan, write the executive summary last so you may condense key concepts from the other nine parts.
It’s a part that catches the investor’s eye and provides key information about your company’s overview and upcoming short- and long-term goals.
Tell them what kind of house flipping business you have and what stage you’re in; for example, are you a startup, do you have a house flipping business that you want to expand, or do you want to convert it into real estate investment firm?
Finally, an executive summary should provide investors with a preview of what they may expect from the rest of your document.
- Provide a high-level overview of the house flipping industry
- The name, location, and mission of your house flipping business
- A description of your house flipping business, including management, advisors, and a brief history
- Discuss the type of house flipping business you are operating, Give an overview of your target customers., and how your company differs from competitors in the industry
- Create a marketing plan that describes your company’s marketing strategies, sales, and partnership plans.
- And give an overview of your financial plan
Check out these executive summary examples to help you write a perfect one for your house flipping business plan.
Free: Executive Summary Examples
An executive summary is the most important part of your business plan, and it need not be challenging to write. This is why we have put together some awesome free Executive Summary examples for you.
Your company overview section in a business plan will be short and clear, similar to the executive summary.
Even if they just have a few minutes, your reader has to understand what your company does and who your customers are.
The following sections will be included in your business plan’s Company Analysis:
- Company summary:
Your company analysis will describe the type of house flipping business you are running and its future goals.
The type of flipping houses business you might be focused, for example, high-end neighborhood houses, apartments, condominiums, single family houses, multi-family houses, old houses, new and damaged houses, foreclosure houses, etc.
- Company history: When and why did you start your flipping houses business?
- What milestones have you achieved so far? Among the milestones might be the number of houses flipped, an certain profit figure, etc.
- Legal structure and ownership: Do you have S-Corp status? Is it an LLC? A sole proprietorship? Describe your legal structure.
- Mission statement: An overview of your house flipping business’s guiding principles. Learn how to write a perfect mission statement.
Provide a brief overview of the house flipping industry in your industry analysis. This may seem unnecessary, but it serves multiple purposes.
First, researching the house flipping industry will educate you. It gives you an understanding of the market in which you are operating. Secondly, market research can improve your strategy, especially if it identifies market trends.
Third, market analysis shows readers you are an expert within your field. Conducting research and presenting it in your plan is the most efficient way to accomplish this.
Industry analysis can be presented as a 8-step process when written as part of a company’s business plan.
- Give a quick overview of the house flipping industry. Define the house flipping business in terms of size (in dollars), historical background, service region, and products.
- Examine previous trends and growth patterns in the house flipping industry.
- Identify the market’s major competitors.
- Age, gender, and general lifestyle of the targeted market
- Determine the factors that have an impact on the house flipping industry. These might include government regulatory rules and other businesses’ competitive activities.
- Using research data, the industry forecast expected growth over the next five to ten years. Predictions should be made for both the long and short term.
- Describe how your house flipping business intends to position itself in the industry. Concentrate on how your house flipping business can benefit from opportunities highlighted in the industry.
The customer analysis section is an important part of any flipping houses business plan since it evaluates the consumer segments that your company serves. It identifies target customers, determines what those customers want, and then explains how your house flipping business will meet those requirements.
Customers can be categorized into the following segments:
- Other real estate investors
- People looking for a house
- Anyone in the market for a house
Customer analysis may be divided into two parts: Psycho-social profiles (why your house flipping suits a customer’s lifestyle) and Demographic profiles (descriptions of a customer’s demographic qualities).
With regards to demographics, include information about: the ages, genders, locations, and income levels of your customers. When targeting businesses, describe what kind of business, size, and location your target customers are.
The psychological profiles of your target clients reveal their wants and needs. The better you understand and identify these demands, the better your chances of attracting and retaining customers will be.
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It is necessary to do a competitor analysis. Because you may use their data to define your goals, marketing plans, tactics, new product lines, pricing, and more. Use competitor analysis to:
- Identify the strength and weakness of your house flipping business competitors.
- Search for opportunities to distinguish your house flipping business from competitors.
The first step is to determine who your direct and indirect competitors are.
The direct competitors consists of other house flipping businesses that offer essentially the same services to the same people as you do.
Indirect competitors are other real estate agents, brokerages, real estate agencies, online property websites like Zillow, Redfin, Realtor, etc. Such competition shows your understanding that not everyone who needs a house will buy it from you.
Once you’ve identified the competition, concentrate on the direct, head-to-head competitors, since they are the most threatening to your house flipping business— but keep an eye on the indirect competition as well, just in case.
Provide an overview of each direct competitor’s business and detail their strengths and weaknesses.
You will be able to position yourself competitively in the market if you perform proper competition research. Perform a SWOT Analysis to learn your competitors’ strengths, weaknesses, and competitive advantages in the following areas:
- Prices – Are they offering cheaper home or better value for the money, or more costly than you and other competitors, what value do buyers get for that price?
- Quality – Are they offering better home renovation and their homes look and function better, and the perceived worth in the eyes of the customers
- Customer service – How they respond to their consumers, whether they treat them poorly or well, and the degrees of satisfaction customers show
- Reputation — The sum of everything mentioned above: their credibility, how loved the brand is, and the loyalty of their customers
The final section of your competitive analysis should include a list of your areas of competitive advantage. for example: Are you going to offer houses for all budget ranges? Do you offer homes with added functions and decor that your competitors do not? Will you offer better pricing or will you offer greater customer support?
Consider how you will outperform your competitors and include them in this portion of your house flipping business plan
Free: SWOT Analysis Examples
Take advantage of our free SWOT analysis examples. Make your business future-proof by identifying your strengths, weaknesses, opportunities, and threats using this free SWOT Analysis Template.
Creating a marketing plan for a house flipping business involves identifying the target demographic and finding art that suit their preferences.
As part of your marketing plan for a house flipping business, you should include:
Pricing and Product Strategy
Your house flipping business must offer houses that have a vast target customer base so that the houses you flip could be sold quickly at a premium. Research what your competitors offer, how they improve the houses they buy, what types of home renovation adds the maximum value and you can outpace them with the premium location, better renovation, quality home material use for the house upgrade, and with a competitive price.
Placing and Promotions
Place refers to the city, neighborhood, or area you will do business in. Describe how your chosen area might attract home buyers. As an example, are you targeting a locality which is receiving an influx of the new settlers from the rural areas, other cities or states, or other neighborhoods of the same city. Are you going to target a wealthy city like New York or a growing city like Atlanta, Salt Lake, or Oklahoma city.
Promoting your house flipping business is the final part of your marketing plan. In this step, you document how you will drive customers to buy your services. A few marketing methods you could consider are:
- Listings in the property listings
- Participating in the industry events
- Property Expo
- Social media marketing
- Get referrals from current clients
- Optimize your Google My Business listings
- Reaching out to local bloggers and websites
- List your business on industry-specific sites
- Community Outreach
You should also think about your house flipping company’s Unique Selling Proposition (USP), which should explain why clients should choose you over other house flipping businesses. Ensure that your USP is reflected in your marketing.
Read Later: How to create a marketing plan in a business plan.
While the previous sections described your goals, your operational plan in a business plan discusses how you will achieve them.
An operations plan is helpful for investors, but it’s also helpful for you and employees because it pushes you to think about tactics and deadlines.
Your operations plan should be divided into two individual parts, as seen below.
Your daily short-term processes include all the tasks involved in running a house flipping business, including hiring and training employees and administering the business. etc.
Your long-term goals are the milestones you hope to reach. It may include the date when you hope to lease the facility or remodel the facility: or when you hope to reach $X in revenue.
The management team section in a business plan‘ outlines your management team, staff, resources, and how your business ownership is structured.
This part may be easily organized by dividing it into the following points:
- Ownership Structure
- Internal Management Team
- External Management Resources
- Human Resources
This section outlines your house flipping business’s legal structure. If your company is a sole proprietorship, it may simply be one phrase. It might be longer if your company is a partnership or a corporation. You should make it a point to clarify who owns what part of the business.
Internal Management Team
This section should not only outline who is on your management team but also how each person’s skill set and experiences will contribute to the growth of your house flipping business. Ideally, you and/or your team members have direct expertise in the house flipping business. If this is the case, highlight your experience and skills.
External Management Resources
Think of these external management resources as your internal management team’s backup. Consider forming an advisory board if your team is lacking expertise and experience with house flipping business.
An advisory board would consist of 3 to 7 people who would serve as mentors to your house flipping company. They would assist in answering queries and providing strategic direction.
If necessary, search for advisory board members with expertise running a house flipping business.
Describe all of your company’s external professional advisers, such as accountants, bankers, attorneys, IT experts, business consultants, and/or business coaches.
The final topic to consider in the management area of your house flipping business plan is your human resource needs.
As part of your financial plan, you should present a 5-year financial statement broken down monthly or quarterly for the first year, and then annually. Financial statements include your income statement, balance sheet, and cash flow statement.
A profit and loss statement is more commonly called an income statement. It shows your revenue and subtracts your expenses to determine whether you were profitable or not.
As you develop your income statement, you need to develop assumptions. Will you serve 30 patients per day or 200? Will sales grow by 2% or 10% per year? Your choice of assumptions will greatly impact your business’s financial forecasts. Conduct as much research as possible in order to ground your assumptions in reality.
Free: Income Statement Template
Create a financial statement for your business by downloading our free income statement templates.
While balance sheets include much information, to simplify them to the key items you need to know about, balance sheets show your assets and liabilities.
The balance sheet shows your house flipping business’s net value at a specific point in time. It categorizes all of your company’s financial data into three categories:
- Assets: Tangible goods with the monetary worth that the company owns.
- Liabilities: Debt owing to a company’s creditor.
- Equity: The net difference when the total liabilities are subtracted from the total assets.
The equation that expresses the relationship between these financial data elements is Assets = Liabilities + Equity.
Create a pro forma balance sheet for your house flipping business plan that highlights the information in the income statement and cash flow projections. A balance sheet is normally prepared once a year by a company.
Balance sheets indicate your assets and liabilities, and while they contain a lot of information, they are simplified to highlight the most important things you need to know.
For example, spending $200,000 to build out your house flipping business will not result in instant revenues. Rather, it is an asset that should help you earn money for many years to come.
Similarly, if a bank sends you a check for $200,000, you do not have to pay it back right now. Rather, that is a liability that you will repay over time.
Cash Flow Statement:
Your cash flow statement will help you determine how much money you need to start or grow your house flipping business. In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a house flipping business:
- Design fees, construction, and other costs associated with location development.
- Cost of equipment like display cases, computers, and software
- The cost of maintaining a sufficient art collection
- Staff payroll or salaries
- The total cost of insurance coverage (general liability, workers’ compensation, and property casualty)
- Start-up inventory costs
Pro Tips: Learn how to write a financial plan in a business plan to help you write a winning house flipping business plan.
Free: Balance Sheet Template
Create a financial statement for your business by downloading our free balance sheet templates.
List any additional material you cannot include elsewhere, such as resumes from key employees, licenses, equipment leases, permits, patents, receipts, bank statements, contracts, and personal and business credit histories.
Attach your full financial projections along with any supporting documents that make your plan more compelling in the appendix.
Bonus Tip: Learn how to write a business plan appendix for your house flipping business.
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Summary of the Flipping Houses Business Plan
A house flipping business plan is a worthwhile investment. As long as you follow the template above, you will become an expert in no time. By following the template, you will understand the house flipping business, your competition, and your customers. The plan will help you understand the steps necessary to launch and grow your house flipping business.
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