HGTV house flipping reality-TV shows are on the rise. But, as a home flipper yourself, you know that these TV shows are missing a huge part of the equation. Any successful house flipping project needs funding. And that funding requires a house flipping business plan.
Beyond funding, it’s essential to consider profits. Because while you might enjoy rehabbing homes, at the end of the day, you want to turn a profit. A house flipping business plan helps you identify and explain your steps to achieving profitability for yourself, your team, and your lenders.
If this is your first time navigating real estate investing, you probably have several questions about how to start a house flipping business. With any business, drafting a business plan is an excellent first step. So, let’s get into it.
A Simple House Flipping Business Plan Template
All business plans have certain required elements. If you’ve never created a business plan before, it can be overwhelming. But, take a deep breath, we’re going to break it down for you. Most house flipping business plan templates include some variation of the following:
- Executive Summary
- Mission Statement
- SWOT Analysis
- Market Analysis
- Financial Projections
- Exit Strategy
We’ll go over each of these at length in a minute. Before we do, keep in mind your individual goals. If you’re hoping to get funding for one rehab project, your business plan will be much simpler. However, if you’re hoping to start a larger company, taking on many flips in conjunction, these eight areas will entail a bit more explanation.
Diving Deeper into a House Flipping Business Plan
So, you already have a basic house flipping business plan template, but we’re going to go into what all of these areas mean.
Here are the 8 areas to every house flipping business plan:
1. Executive Summary
This portion of your business plan is dedicated to your elevator business pitch. Briefly explain your goals, intentions, and your company at large. This is also an ideal place to go over what’s coming up in the rest of the business plan. This section is like a high-level summary of the entire business plan. But remember, keep it brief, because you’ll be going into all the details throughout the remainder of the proposal.
2. Mission Statement
Now, some experts say you should include this in your executive summary portion of your plan. Others advocate for presenting it separately. Either is fine, and it’s really a matter of personal preference. The important thing is that you include it somewhere. Your mission statement is different than your executive summary because it’s more about your overall vision and core values. Your executive summary is about what you are, and your mission statement is about who you are.
3. SWOT Analysis
SWOT is an acronym that stands for:
- Strength – What strengths does your company bring to the table?
- Weakness – What weaknesses do you have as a company?
- Opportunities – What unique opportunities exist right now that make your company viable? (This is also where you can explain away weaknesses).
- Threat – What threats will you face as a company?
This is a fantastic place to be honest with yourself, investors, and potential partners. So, let’s look at it in practical application. Let’s say you’re a brand-new house flipping company. Your strengths could be your fresh perspective, your skilled team, or your team’s business or construction background. Think about what makes you different from your competitors. For weaknesses, it could be that you’re new to the market, but that also creates an opportunity to capitalize on the growing market with your new ideas.
Threats are sort of like weaknesses, except that they’re things that are impossible to prepare for. For instance, another mortgage market crash, like in 2007, or damaging weather conditions which could stall your project.
4. Market Analysis
This will probably be the most research-intensive part of your plan. The good news is that this information is not just helpful for lenders and partners; it’s crucial information for you to know, too. A market analysis is a comprehensive look at the market. You’ll look at past trends, present trends, and make future predictions by looking into costs, pricing, competitor numbers, historical shifts, and more. This section is all about proving to investors that the market is viable, thriving, and worthy of investment.
5. Financial Projections
This area is the most critical part of your entire plan. This is where you break down how much money you need and how much money you can expect to profit. To do this, you’ll have to calculate costs. This entails things like property costs, rehab costs, marketing costs, and other expenses. Don’t forget to include things like realtor fees, closing costs, taxes, materials expenses, disposal fees, and more.
Once you have your costs, using your market research, you calculate a realistic projected profit. You take the amount of money you’re asking for, subtract the costs, and project the potential profit. Be sure to explain how big of a return the investor can expect. If you’re going with a lender rather than an investor, you’re aiming to prove that repayment won’t be an issue.
Now that you’ve laid the potential, you have to set a realistic timeframe to make it happen. Be honest here. A good trick is to decide on how long you expect the project to take and then add several months to that. Your timeline should go over what you’re doing each month to complete the project to get to the finish line.
This is where you create a plan of action for making sure that everything runs smoothly. You’ll cover the basics of your team dynamic, like who is in charge of what portion of the overall goal. More importantly, though, you’ll be outlining how you plan to market and grow. If you’re just flipping one home, outline how you’re going to ensure the home sells. Maybe you’ll go to networking events, create an online social media campaign, or create door hangers and business cards to hand out. If your goal is to sell multiple properties and turn this into a viable business, how are you going to do it? What is your strategy for growth?
Growth strategy is all about how you scale. Break down the moves step by step for growth and profitability.
8. Exit Strategy
No one wants to think about failure when starting a new project, but as a house flipper, it’s a part of the gig. There are unforeseen circumstances that happen all the time. Let’s say your properties don’t sell; you can make your exit strategy focused on changing your goal from selling the properties to renting them out.
Other options for exit strategies are quickly flipping and selling a property for a profit to pay back a loan. There’s also the cash-out refinance option, where the investor pays off the remaining mortgage with the loan and pockets the difference. Whatever route you choose, you’ll want to have an exit strategy that ensures that no matter what happens, your investor or lender will be repaid.
Benefits to a House Flipping Business Plan
It might seem like a lot of work, but the benefits of doing a house flipping business plan make that work worth it. Here are just a few of those benefits:
- It helps you get and stay focused and organized.
- It ensures that investors and lenders take you seriously.
- It forces you to look at your financial goals and projections realistically.
- It dramatically increases the probability that you’ll get the funding you need.
If you find yourself asking, “How do I start a house flipping business?”, the answer is clear. Start with a business plan. Begin thinking about ways you can reach your profit goals and save money along the way.
When you reach the point in your house flipping project where you’ll need to find a dumpster rental company experienced in working on construction and renovation projects, don’t hesitate to reach out to Captain Hook Austin Dumpster Rental.
Little things like comparing material costs and dumpster sizes to save on disposal costs can make a significant impact on the financial projections portion of your business plan. And as a business owner, we know you’re looking to cut costs. Give us a call or fill out our online form to discuss your project, and this is something we can help you with.
If you follow your business plan step by step, you’ll have a thriving house flipping business, worthy of reality-TV exposure in no time!