How To Start Flipping Houses In Texas: The 4 Best Cities In 2024Dec 05, 2023
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 fixing and flipping 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:
- How To Flip Houses In Texas (7 Steps)
- Is Flipping Houses In Texas Profitable?
- Best Cities To Flip Houses In Texas
- What Are The Requirements To Flip Houses In Texas?
- Do You Need A License To Flip Houses In Texas?
- How Much Does It Cost To Flip A House In Texas?
- How To Flip Houses In Texas With No Money?
- How To Start Flipping Houses In Texas As A Beginner?
- Bottom Line: Is Texas A Good Place To Flip Houses?
*Before we begin our guide, we also invite you to view our video on How To FLIP A HOUSE For Beginners (Step-by-Step). Host and CEO of Real Estate Skills, Alex Martinez, & Stan Gendlin share how to flip houses in Texas from start to finish as a beginner!
Together, Alex & Stan have completed over 1,000+ house flips. What you learn in this video will give you the confidence and guidance to successfully complete your fix-and-flip project!
How To Start Flipping Houses In Texas (7 Steps)
Here are the 7 simple steps for how to flip houses in the Lone Star State.
- Create A Budget & Secure Financing
- Research Texas Counties & Cities
- Consider Your Skills, Resources, & Bandwidth
- Assemble Your House Flipping Team
- Choose & Purchase Your Texas House
- Rehab The Property
- Rent Or Resell Your Rehabbed Property
1. Create A Budget & Secure Financing
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 your 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 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
Read Also: MAO Formula (Maximum Allowable Offer)
2. Research Texas Counties & Cities
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.
3. Consider Your Skills, Resources, & Bandwidth
You must be 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.
4. Assemble Your House Flipping Team
You're likely going to need a real estate attorney, an experienced mentor, a lender, a realtor, a general contractor, and responsible accountable laborers 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.
5. Choose & Purchase Your Texas House
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, and timeline that fits into your agent, mentor, and real estate attorney's advice.
6. Rehab The Property
- If You're New or Short On Cash: 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 Have Experience or Cash Available: 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.
7. Rent Or Resell Your Rehabbed Property
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.
Is Flipping Houses In Texas Profitable?
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. The median Texas home price is up at $345,000, up 11.3% compared to the same period last year. Also, Texas is projected to invest $2,859 billion into real estate, which is ~8% of all investments across the US.
Now where are the best places to purchase and flip houses in Texas?
Best Cities To Flip Houses In Texas
Identifying the best cities for house flipping in Texas involves assessing market dynamics and recognizing areas with high demand and profit potential. Key cities for this venture include:
- Houston: Known for its vast and varied neighborhoods, Houston presents numerous opportunities for house flippers, with a median listing price of approximately $314,040.
- Dallas-Fort Worth-Arlington: This thriving metro area boasts a strong and growing real estate market, particularly in its suburbs. The median listing price here is around $333,730.
- San Antonio: With its increasing population and affordable living costs, San Antonio is a favored spot for house flipping, offering properties at a median price of $269,000.
- Austin: As a hub for the tech industry, Austin sees rising home prices, creating opportunities for profitable flips, especially for those with significant investment capital. The median listing price in Austin is about $579,000.
When evaluating potential locations for house flipping, consider factors like housing affordability, market demand, economic and population growth, and overall market trends. Navigating these variables can be complex, but understanding them is crucial for successful house-flipping projects.
What Are The Requirements To Flip Houses In Texas?
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?
Do You Need A License To Flip Houses 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.
How Much Does It Cost To Flip A House In Texas?
The cost to flip a house in Texas varies wildly.
- If you purchase a distressed property, foreclosed, or auction home, your price drops.
- If you buy a rural home or a house in an undesirable location, your price drops.
- If you purchase a nearly fully rehabbed or nearly-perfect home, the price increases.
- Properties in metropolises or with large swaths of acreage typically cost more.
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.
How To Flip Houses In Texas With No Money
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 before 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 residence, but it is an option. It is also not recommended to leave yourself with less than 20% of your equity. 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.
Can You Start Flipping Houses In Texas As A Beginner?
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.
Final Thoughts: Is Texas A Good Place To Flip Houses?
Ready to get started flipping houses in Texas?
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.