House flipping—purchasing properties and reselling them for profit—remains one of the most popular strategies for investors seeking relatively quick returns. Buy homes in promising areas, add value through renovations, sell to buyers who will live there long-term.
The consistent year-over-year growth in many real estate markets makes flipping attractive. But first-time flippers quickly discover complexities they never anticipated.
Let me walk you through the process step by step.
The Reality of House Flipping
Expect the Unexpected
Before investing, accept that complications will arise. The unforeseen is virtually guaranteed in renovation projects.
| Challenge | How to Prepare |
|---|---|
| Unexpected repairs | Build 15-20% contingency |
| Timeline delays | Add buffer to estimates |
| Contractor issues | Vet thoroughly, have backups |
| Market changes | Monitor trends, stay flexible |
Multi-tasking reality: You’ll juggle multiple tasks at every stage.
Patience development: Timelines extend. Contractors disappoint. Markets shift.
Know Your Budget
Get pre-approved first. Obtain financing pre-approval before shopping. Knowing your exact budget enables strategic purchasing.
Stick to numbers. Flipping success requires budget discipline. Emotional decisions destroy profits.
Choose the right lender. Not all lenders support flipping. Some have penalties that eat into returns.
Understand total costs. Budget for purchase, renovation, holding costs, and selling costs.
Step 1: Locate an Ideal Property
Property Sourcing
MLS searches: Work with agents to identify listed properties with flip potential.
Off-market properties: Direct owner contact, wholesalers, and networking surface opportunities.
Auctions and foreclosures: Bank-owned properties can offer below-market prices.
Driving for dollars: Physically driving neighborhoods to identify neglected properties.
Motivated Sellers
Distressed situations: Financial difficulties, divorce, estate sales create motivation.
Problem properties: Tired owners may sell at attractive prices.
Relocation urgency: Job transfers create timeline pressure.
Tired landlords: Exhausted owners may accept below-market offers.
Location Evaluation
Neighborhood analysis: Research trends, development plans, price trajectories.
School quality: For family properties, school ratings significantly affect resale.
Amenity access: Proximity to shopping, dining, transit affects buyer appeal.
Comparable sales: Study what renovated properties sell for in target neighborhoods.
Step 2: Apply the 70% Rule
This foundational guideline protects profitability.
The Formula
Your purchase price plus renovation costs should not exceed 70% of the property’s after-repair value (ARV).
Example: ARV is $400,000 → Maximum all-in is $280,000. If renovations cost $80,000 → Maximum purchase is $200,000.
The remaining 30% covers selling costs, holding costs, unexpected expenses, and profit.
Beyond the Rule
Holding costs: Monthly carrying costs accumulate throughout the project.
Selling costs: Agent commissions (5-6%), closing costs, potential buyer concessions.
Contingency: Add 15-20% to renovation estimates for unexpected discoveries.
Profit target: Define minimum acceptable profit before pursuing properties.
Step 3: Plan the Renovation
DIY vs. Professional Work
Skill assessment: Honestly evaluate your capabilities. Poor DIY work costs more to fix than hiring professionals.
Time consideration: DIY extends timelines. Calculate whether professional time savings offset higher costs.
Permit requirements: Many jurisdictions require licensed professionals for electrical, plumbing, structural work.
Quality standards: Market-ready properties require professional-quality finishes.
Scope Definition
Match market expectations: Renovate to what successful comparables offer. Over-improvement wastes money.
Focus on returns: Kitchens, bathrooms, and curb appeal typically deliver highest ROI.
Understand buyer psychology: Focus on what buyers in your target market prioritize.
Resist scope creep: Define scope before starting and stick to it.
Contractor Management
Get multiple bids: At least three for major work. Compare carefully.
Verify everything: Check references. Confirm licenses and insurance.
Monitor progress: Check work regularly. Catch problems early.
Step 4: Control Costs
Purchase Price Optimization
Negotiate aggressively: Purchase price represents your biggest savings opportunity.
Focus on motivated sellers: Properties from motivated sellers often sell below market.
Condition discount: Distressed properties should price accordingly.
Financing optimization: Shop mortgage options to minimize costs.
Renovation Cost Management
Material shopping: Compare prices across suppliers. Wholesale options can significantly reduce costs.
Value engineering: Find less expensive alternatives achieving similar results.
Contractor value: Cheapest isn’t always best. Balance price against quality and reliability.
Scope control: Resist adding work beyond the original plan.
Where NOT to Cut Corners
Structural integrity: Never compromise structural work.
Major systems: HVAC, plumbing, electrical must work properly.
Inspection items: Address issues properly rather than creating problems that surface later.
Finish quality: Market-ready finishes matter for sale price.
Step 5: Sell for Profit
Pre-Sale Preparation
Complete punch list: Address all incomplete items before listing.
Professional cleaning: Cleanliness significantly affects buyer perception.
Staging consideration: Staged properties often sell faster and for higher prices.
Photography investment: Quality listing photos are essential.
Pricing Strategy
Comparable analysis: Study recent sales of similar renovated properties.
Market conditions: Adjust based on buyer demand, inventory levels, trend direction.
Timeline urgency: Holding costs accumulate daily. Balance pricing against timeline pressure.
Marketing Execution
Ready to explore your financing options? Book a free strategy call with LendCity and let our team help you find the right path forward.
Agent selection: Choose agents experienced with renovated properties.
Listing optimization: Highlight key features and renovations effectively.
Showing availability: Make properties easy to show.
Feedback response: Address issues promptly if feedback indicates problems.
Frequently Asked Questions
How much money do I need to start?
How long does a typical flip take?
Should I quit my job to flip houses?
What's the biggest mistake new flippers make?
How do I know if a property is right for flipping?
How does the 70% rule protect my flip profits?
Should I do renovation work myself or hire contractors?
The Bottom Line
House flipping can be highly profitable for investors who approach it systematically.
Find the right property. Apply the 70% rule. Plan renovations strategically. Control costs ruthlessly. Execute the sale efficiently.
The investors who succeed are the ones who do their homework, budget conservatively, and execute with discipline.
That’s how you flip houses profitably.
Disclaimer: LendCity Mortgages is a licensed mortgage brokerage. Content on this page is for educational purposes only and does not constitute legal, tax, investment, securities, or financial-planning advice. Rates, premiums, program terms, and regulations referenced are as of the page's last updated date and are subject to change. Any investment returns, rental yields, tax savings, or case-study figures shown are illustrative only — they are not guaranteed, not typical, and individual results will vary. Consult a licensed lawyer, Chartered Professional Accountant, or registered dealer before acting on any information above.
Written by
LendCity
Published
May 5, 2026
Reading time
5 min read
70% Rule
A fix-and-flip guideline stating you should pay no more than 70% of a property's after-repair value (ARV) minus renovation costs. On a home with a $300,000 ARV and $50,000 in repairs, your max purchase price would be $160,000. This margin accounts for holding costs, selling costs, and profit.
Carrying Costs
The ongoing expenses of holding a property, including mortgage payments, property taxes, insurance, utilities, and maintenance. Understanding carrying costs is essential during renovation periods when the property generates no rental income.
Closing Costs
Fees paid when completing a real estate transaction, including legal fees, land transfer tax, title insurance, appraisals, and adjustments. Closing costs affect your total cash invested and therefore your [cash-on-cash return](/glossary/cash-on-cash-return).
Contractor
A licensed professional hired to perform construction, renovation, or repair work on investment properties. Using licensed and insured contractors is essential for permitted work, as unlicensed contractors can result in voided insurance, property liens, and liability for injuries.
Curb Appeal
The visual attractiveness of a property as viewed from the street, which impacts buyer and tenant interest. Strong curb appeal can justify higher rents, reduce vacancy periods, and increase property values through relatively low-cost improvements like landscaping, fresh paint, and exterior maintenance.
Down Payment
The upfront cash payment when purchasing a property. For 1-4 unit investment properties, minimum 20% down is required. 5+ unit multifamily can use CMHC MLI Select with lower down payments, and house hackers can put as little as 5% down on owner-occupied 2-4 plexes. Your down payment directly affects your [LTV](/glossary/ltv) and the amount of [leverage](/glossary/leverage) you use.
Foreclosure
The legal process by which a lender seizes and sells a property after the borrower defaults on mortgage payments. In Canada, the process varies by province and may include judicial sale or power of sale. Foreclosed properties can offer below-market pricing but carry condition and title risks.
Foundation
The structural base of a building that transfers loads to the ground. Foundation issues such as cracks, settling, or water intrusion are among the most expensive repairs in real estate and can significantly impact property value and financing eligibility.
HVAC
Heating, Ventilation, and Air Conditioning systems that control temperature and air quality in buildings. HVAC is often one of the largest energy expenses in rental properties, and upgrading to high-efficiency systems can significantly reduce operating costs and increase NOI.
MLS
Multiple Listing Service - a database used by licensed real estate agents to list properties for sale, providing standardized property information, photos, and pricing. Investors also use off-market strategies to find deals not listed on the MLS.
Hover over terms to see definitions. View the full glossary for all terms.