Are you considering flipping houses in Texas? You've come to the right place.
In this guide, we're going to cover everything you need to successfully research, purchase, renovate, and sell homes in Texas.
We'll also touch on the legalities of fix and flip properties, the best cities to invest in, and how to finance your flip investment (even if you have no money or poor credit).
Texas is home to a robust and expansive real estate market with unique opportunities to create wealth. Whether you're a Texas real estate investor, virtual wholesaler, or licensed agent, this guide will teach you how to flip houses in Texas.
What's Inside This Article:
It's no surprise that the Texas housing market has been on fire over the past several years.
Here are a few key pieces of information investors should know before flipping houses in Texas.
Texas' months of inventory, as of October 2021, (MOI) sits at 1.6 months. Six MOI is considered balanced, meaning that supply is down significantly while the demand holds strong. Purchasing a house to flip won't be easy, but if you can get your hands on one, the demand will be there to buy it after your renovations are complete.
Why is that? Thanks to the pandemic, it was difficult for construction crews to assemble new homes, meaning that home building could not sustain the large influx of new residents to Texas. This meant that new residents were limited to pre-existing homes, raising the competition for homebuyers.
Next, you should consider purchase prices. Texas' median home price rose another 1.4% in October of 2021, raising the YOY to 15.5%. This means that the Texas median home price is now $312,700, a rate never seen before.
For reference, the median home sale price in the US was $358,000 in 2021.
Flipping homes is usually a quick process too. In McAllen-Edinburg, Texas, for example, it only took an average of 127 days to fully flip a home. For reference, the nationwide average sits at 180 days per house flip. Also, in McAllen-Edinburg the flipping market is up 55%.
In 2019, Austin, Texas, was named the #1 Best Place to Live in America (Austin was recently bumped down to the #5 spot in 2022).
The Woodlands and Plano, Texas, were also named the #3 and #4 Best Cities to Buy a House in America, respectively.
Lastly, Dallas Fort-Worth (DFW) was ranked as the 10th Best Place in the US to Retire.
The economy is strong in the Lone Star State too. Last year, in 2021, Texas was the top exporting state in the US according to the Bureau of Economic Analysis. This is the 19th consecutive year that Texas was the top exporting state. It is also #1 in foreign direct investment.
Texans can enjoy mild winters, incredible diversity, beaches, lively cities, and beautiful wilderness areas.
Not only does Texas not have a state income tax, but their capital gains tax is also quite minimal. This means that Texas can be a bit of a tax haven for employees, employers, and entrepreneurs everywhere.
Elon Musk, for example, saved an estimated $2.5 billion by moving to Texas from California.
According to Move.org, Texas was the second most moved-to state in the United States in 2020, only losing to Florida by a margin.
Many believe the Covid-19 pandemic and newly available work-from-home jobs were responsible for so many Americans moving to more rural areas (and states).
The Texas population also rose by nearly four million people in the past nine years. Now, almost 29 million people call Texas home.
While Texas is not listed as one of the top ten states to flip profit margin-wise (according to Attom Data), it's still a profitable flip state, and it also has the potential to be a quick flip.
Every deal is different and it comes down to the individual project numbers. Your prior experience, education, and skills will also impact your ability to flip a house profitably.
If you are willing to look for the right deal and invest in your flip project wisely, you can be profitable just about anywhere you go.
Let's run through the numbers.
Here are the seven simple steps for how to flip houses in the Lone Star State.
Before you start looking at potential properties, run the numbers first. This will save you time and give you a realistic approach to real estate flipping.
If you are using a private money lender, get in touch with them first. They can tell you how much home to buy, your estimated down payment, and interest rate, and they can help you plan the financial side of your flip.
Your options are a traditional home loan that lasts fifteen to thirty years or a short-term hard money loan where the mortgage payments only last six to twenty-four months. If you're taking on the loan yourself, you're going to need a good (or excellent) credit score to land a desirable interest rate.
If you don't have that great of a score, consider using a co-signer, an investor, or even an unconventional subject-to real estate deal.
If you are using your own cash or the cash of an investor, you already know how much capital you have to work with.
If you (or your general contractor) estimate that the property will have an ARV of $300,000 after $50,000 worth of repairs, then you should pay no more than $160,000 for the property.
Here's how this house flipping calculation works:
(70% x ARV) - cost to repair = Maximum price you should pay for the home (MAO)
For this example, the math would look like this:
(70% x $300,000) - $50,000 = $160,000
We will go into more detail on some of the best cities to invest in below.
Regardless, it would be best if you did your due diligence when researching counties, cities, and neighborhoods that you intend to invest in. Having a knowledgeable realtor who understands the local Texas real estate market can be a valuable asset.
Your real estate agent also understands the trends in tricky metro areas, as well as moving patterns, up-and-coming neighborhoods, and potentially profitable foreclosures that may or may not be on the market yet. They may also be able to help you navigate real estate auctions, which can be confusing to newbies yet serve as a valuable purchasing strategy.
When researching places to purchase in Texas, pay attention to more than the numbers.
For instance, make sure that the neighborhood you're considering isn't part of a flood plain. That can be an issue in the eastern or coastal sections of Texas.
It's crucial that you are honest and realistic with yourself here.
Keeping an open perspective in this step can prevent lots of stress, financial, and time issues in your flip project.
Can you make most of the repairs yourself? Are you willing to learn how to do them? Can you hire someone to do it for you? If you hire someone, are you ready to step back and let the professionals do their jobs without micromanaging? If you make a mistake, or there is a significant issue with the home, can you afford a setback- financially or time-wise? Do you have someone to help you out as a mentor? Can you hire a mentor if not?
Determine a timeline, decide how involved you want to be, and understand that things are likely to come up. Be flexible, be creative, and be patient.
You're likely going to need a real estate attorney, an experienced mentor, a lender, a realtor, a general contractor, and responsible accountable laborers in order to make this flip a success.
For your rehab contractors, you will want to start to create a scope of work, start taking written bids from the local contractors, plan your renovation budget, and set contracts in place with the contractor of your choosing.
Get all of these people lined up and ready before you purchase the home. Doing so will allow you to seamlessly begin work right away on day one, saving you precious time and money.
What an exciting step!
Homes that need more extensive repairs will be cheaper to purchase but more costly to rehab. They also require more time.
Houses that are in better shape will have a higher home value and purchase price but will come with cheaper repairs and a shorter rehab period.
Choose a home that best suits your skills, finances, timeline, and fits into the advice that your agent, mentor, and real estate attorney advise.
If you're a first-time flipper, it can be daunting to roll up your sleeves and start working on your project. However, you don't have to dive right into complicated electrical work.
Tasks such as power washing the exterior (don't do the roof!), painting the interior, replacing a leaky faucet, reglazing and caulking tubs, and sweeping floors are all valuable and will help move your project along.
If you come into this with an open mind and a can-do attitude, along with a healthy dose of teachability, you're going to do well.
After you have some capital to work with, it's important to begin delegating the physical labor portion of house rehabbing to the experts. This saves you time and will allow you to work on other areas of this flip, or even start planning your next investment.
Rehabbed properties can make fine rental properties or net you a healthy gross profit via a resell. The choice is yours and depends on what your long-term goals are as a real estate investor.
Rental properties bring you a stream of small, recurring sums of income. With a property manager, that income is completely passive.
Selling the property will net you one large lump sum that you can use to invest elsewhere all over again.
Which option suits you the best?
You do not need a special license to flip houses in Texas.
Actually, you don't even need much money or a credit score to purchase a home. You can take on an assumable mortgage or do a subject-to transaction. These options allow you to take over another person's mortgage, locked in using their credit score and their interest rate, in order to buy the property.
Basically, the only requirement to flip houses in Texas is the willingness to try, make mistakes, learn, and do better.
Read Also: Is Wholesaling Real Estate Legal In Texas?
You do not need a license to flip houses in Texas.
You do not need a realtor license, nor do you need a contractor license.
Of course, having these can be beneficial to you, especially if you plan on making this avenue of real estate a regular part of your investment strategy, but it is certainly not a requirement.
If you don't plan on getting either of these licenses, do your best to find a reputable, experienced realtor and contractor with whom you can build a solid business relationship.
It is significantly better to have a trusted person to work with rather than a new professional for every flip project.
The cost to flip a house in Texas varies wildly.
In addition to your purchase price of the home, you'll also need to factor in home repair costs, carrying costs, as well as closing, marketing, and sales costs.
You can lower your home repair costs by doing more (or all) of the work yourself.
Carrying costs, closing, marketing, and sale costs are pretty fixed and cannot really be negotiated. Luckily, these expenses are significantly cheaper than the purchase and rehab investment of the home.
If you want to flip a house in Texas, but you don't have much (or any) cash, you should consider finding a private money lender or equity investor.
A lender or investor may front all of the cash required to purchase and rehab a distressed property, and in return, you are expected to do the legwork such as sourcing the deal, filling out the paperwork, completing the repairs, marketing the home, and then getting it sold.
Of course, the investor will be paid interest or a nice portion of the profit in exchange for providing you with the capital for your flip project.
Another option is to wholesale a few houses prior to flipping one. This is a relatively easy, no-cost way to dip your toes into real estate and net a healthy profit without using your own money.
You can also use the equity you have built in another home to purchase your flip property. A cashout refinance is not recommended if your equity is built up in your personal residence, but it is an option. It is also not recommended to leave yourself with less than 20% of your equity. Basically, you will cash out on the amount of equity your house has to buy the investment property.
A home equity line of credit (HELOC) is another option that works like a credit card. You can borrow against your home's equity and make payments each month. A HELOC grants you a large lump sum of cash that you can use towards your investment project. The more equity you have, the more likely you will be approved, and the more money you will likely be approved for.
A lease option, or lease to buy, is another way to go. You, the investor, secure the option to purchase the property for a set amount of dollars, while simultaneously leasing it for a set period. This option gives you control over the asset and it requires far less money upfront. You often don't even need a lot of money down to get this process started, besides potentially a security deposit and an option fee.
Lastly, you can do an assumable mortgage or subject-to real estate transaction as mentioned above. While these two options slightly differ, the main idea is that you take over someone else's mortgage payments on their home in exchange for ownership of the property. Usually, this person is in financial distress or facing foreclosure, but this isn't always the case.
Ranked as the 33rd Best City in the United States (as of the first quarter of 2021) to flip houses (the highest-ranking city that Texas has to offer), Laredo is worth consideration.
The average listing price here is $224,900 and offers up an incredible 560 homes for sale as of February 2022. These homes range from $24,900 to $6,500,000, meaning you'll have your pick when it comes to variety.
The elementary schools here are all 9's and 10's, meaning that education is incredible, and the homes are most desirable for young couples and parents.
Fort Worth is the 69th best city in 2021 in the United States to flip houses. Dallas ranks 127th.
Dallas has 2,544 homes for sale as of February 2022 with a median listing price of $415,300 and approximately $223 per square foot. Dallas is firmly in a seller's market, with significantly more people looking to purchase homes compared to those willing to sell.
Fort Worth is in an even strong seller's market than Dallas. Fort Worth has about the same number of homes for sale, but with a $329,000 median listing price and only $166 per square foot. Your competition as a buyer will be fierce, but once your property is rehabbed, you'll have no problem selling it for an attractive price.
As of 2021, Houston ranks as the 143rd best city in the US to flip houses.
Houston has over eleven thousand homes for sale, with a median listing price of $325,000. Most of these homes sell after 55 days on the market.
This city also boasts an impressive array of public schools. All of their elementary, middle and high schools rank as 9/10 or 10/10. Houston is a highly desirable area for young couples and parents, so keep this in mind when rehabbing your flip property.
With that said, Houston is a coastal city with plenty of floodplains. Keep this in mind and be vigilant when searching for your investment home.
According to Attom Data, Austin is listed as the 48th best city in the United States to flip houses as of February 2022. Austin has 1,556 homes on the market with a $579,000 median list price, with homes ranging from $29,000 to $18,000,000.
Austin is in a buyer's market, which makes it one of the few major cities in the state of Texas that isn't in a hard seller's market. Their supply of homes far outweighs the demand.
San Antonio is the 75th best city to flip houses in the United States. San Antonio is a more modest-sized city with more affordable homes. The median list price is $275,000, with the median price per square foot as $153. Like Austin, it's a heavy buyer's market. Still, San Antonio houses only it on the market for an average of 41 days.
El Paso is the 70th best city in the US to flip houses. Sitting on the border of Texas, New Mexico, and Mexico, El Paso is a trending city with a 10.8% YOY increase. One thousand three hundred ninety-two homes are currently for sale here, with $221,000 being the median home price.
While houses sit on the market a little longer than other Texas cities at 60 days, it is a strong seller's market with tough competition.
El Paso has a strong demand for rental properties, so consider turning your rehabbed home into a family-friendly rental property.
The best advice for a newbie would be to find a coach, mentor, or skills group willing to take you in and teach you the ropes of flipping houses. You can also work as an apprentice for another real estate investor.
Read books, blogs, and articles. Listen to the podcasts or YouTube videos of experienced, successful real estate flippers.
If you're willing to go all-in and join an intensive real estate house flipping program, check out our brand new free training on how to find and flip houses in 30 days or less!
Most of all, be willing to jump in and start learning in a hands-on environment- be it your own investment or as an apprentice or intern for someone else's.
While Texas isn't the most profitable state to flip real estate according to some recently reported data, it is rapidly growing and has a lot to offer to the people who live in the Lone Star State.
Making a profitable, worthwhile flip all comes down to the individual investor's skills, efforts, and willingness to source a good deal, execute a thoughtful plan, properly rehab the home, and attract a top-dollar buyer.
Texas offers affordable real estate in the more rural areas and competitive, luxury property in the major cities. No doubt, no matter which style you prefer, there's something for every investor in Texas.
Ready to get started flipping houses in Texas? Already a seasoned Texas house flipper? Let us know in the comments below!
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