How To Flip Houses In Illinois

How To Flip Houses In Illinois: Step By Step Home Renovation Guide

flipping houses real estate investing strategies real estate markets (states) Jun 12, 2024

If you want to learn how to flip houses in Illinois, you’ve come to the right place. This state-specific guide will teach you everything you need to know about flipping homes in The Prairie State, including:

Ready to take your house-flipping skills to the next level? Enroll in Real Estate Skills' free training program today! Our expert guidance will help you implement the information you've learned here and capitalize on the opportunities in the Illinois real estate market. Don't miss out—start your journey to successful house flipping now!

What Is Flipping Houses?

Flipping houses is an investment strategy where investors buy real estate to rehab and resell it for a profit. It’s worth pointing out, however, that the key to flipping isn’t simply about buying any house for sale; it’s about buying real estate with the best profit margins. As a result, house flippers will emphasize acquiring distressed assets, or those they can purchase below market value.

Buying a home at a discount relative to the rest of the market requires a mind for due diligence and often results in purchasing an undervalued, outdated, poorly kept, or distressed home. Nonetheless, the purchase price is critical because flippers work on profit margins. Buying a home at a discount gives investors enough of a budget to make improvements and sell it for more than they have invested.

House flipping has proven capable of providing good returns, which begs the question: Why flip houses in Illinois? Let’s dive into some statistics that may encourage more people to learn how to flip houses in Illinois.

Illinois House Flipping Statistics

Real estate investing is one of the most incredible wealth-building vehicles across every industry. Despite the latest market turbulence, in fact, home flipping remains a lucrative strategy in every state.

According to ATTOM Data Solutions’ third-quarter 2022 U.S. Home Flipping Report, 92,422 single-family houses and condominiums were flipped in the third quarter of last year. The average gross profit in the report was $62,000, translating to a return on investment (ROI) of about 25%.

However, learning how to flip houses in Illinois comes with added benefits. Most notably, the local housing market offers investors some of the best chances to buy homes below market value.

According to ATTOM Data Solutions’ first Foreclosure Market Report of the year, the Illinois real estate market has the second-highest foreclosure rate in the country. Trailing only Delaware, one in every 2,279 homes in Illinois had a foreclosure filing as recently as January.

According to SoFi, that rate translated to 2,375 of the state’s 5,412,995 homes falling into foreclosure. The counties with the highest distribution of foreclosures were Macoupin, Washington, Kendall, Madison, and Whiteside, according to the SoFi report.

For some added context, the foreclosure rate in Illinois was almost double the national average. “Nationwide, one in every 4,425 housing units had a foreclosure filing in January 2023,” according to the Home Flipping Report.

With a disproportionately high foreclosure rate, the Illinois property market offers ample opportunities (per housing unit) to acquire a home below market value. Local investors should have a relatively easy time finding their next deal. In fact, anyone learning how to flip houses in Alabama should prioritize recent and dependable housing indicators, not unlike those listed below;

  • Population: 12, 812, 508
  • Employment Rate: 61.7%
  • Median Household Income: $76, 708
  • Median Sale Price: $295,400 (+7.3% Year-Over-Year)
  • Number Of Homes Sold: 12,058 (+7.8% Year-Over-Year)
  • Median Days On Market: 43 (-3 Year-Over-Year)
  • Number Of Homes For Sale: 40,882 (-3.7% Year-Over-Year)
  • Number Of Newly Listed Homes: 15, 133 (+5.5% Year-Over-Year)
  • Months Of Supply: 2 (+0 Year-Over-Year)
  • Homes Sold Above List Price: 43.0% (+3.0% Points Year-Over-Year)
  • Homes With Price Drops: 16.3% (+3.9 Points Year-Over-Year)
  • Foreclosure Rate: 0.101% (1 Out Of 989)

*All Illinois housing market statistics are as of Q2 2024

Illinois Statistics

How To Flip Houses In Illinois (7 Steps)

Learning how to flip houses in Illinois doesn’t need to be intimidating. There’s already a seven-step process successful investors are following today, and there’s no reason you can’t follow in their footsteps for the first time this year.

If you want to learn how to flip houses in Illinois, follow the steps outlined below: 

  1. Find A House-Flipping Mentor
  2. Research The Illinois Housing Market
  3. Find & Analyze Distressed Properties In Illinois
  4. Raise Capital To Fund The Deal
  5. Close On The House
  6. Renovate The Property
  7. Resell The House

Find a House-Flipping Mentor In Illinois

Find A House-Flipping Mentor

Investors who want to learn how to flip houses in Illinois should talk to someone already doing so, with at least some degree of success. With a mentor, you’ll simultaneously be able to mitigate risk by learning from those who have come before you and optimize efficiency while dropping the learning curve. A truly great mentor gives you a head start and allows you to build off of a stronger foundation.

Many mentors may extend their services at no cost, but it’s not fair to expect a free lunch. It is in your best interest to make yourself valuable to your mentor; that way, you may prolong your education and start building a valuable network. To that end, even mentors that charge may be worth the investment. You can’t put a price on education or the mistakes it can help you avoid.

Research the Illinois Housing Market

Research The Illinois Housing Market

Knowledge is power in the real estate industry. The more investors know about the area they invest in, the better off they will be. To make sure you get started on the right foot, try researching the local housing market using the following tools:

Read Also:  How To Find Off Market Properties in Illinois: 4 Best Sources

Find And Analyze Distressed Properties In Illinois

Find and Analyze Distressed Properties in Illinois

With a better idea of what’s happening in the real estate market, investors should start locating and analyzing distressed properties. While there are countless ways to find and analyze deals, there’s one place for beginners to start: the 70% rule.

Not to be confused with a definitive valuation tool, the 70% rule is more akin to a guideline; one that can estimate whether or not a deal is worth pursuing. Perhaps better described as a “rule of thumb,” the 70% rule is a good way for new investors to get acquainted with some of the most critical numbers in a deal.

First, investors need to identify the after-repair value (ARV) of a home. As its name suggests, the after-repair value estimates what the subject property would be worth after it is rehabbed. The easiest way to get this number is by using nearby “comps” or comparable properties. Once you have that number, multiply it by .70 (or 70%) and subtract the amount you budget for repairs. The resulting number should determine your maximum allowable offer (MAO) — the most you could spend on the home and still make a decent profit.

There’s a lot the 70% rule doesn’t account for. As a result, it shouldn’t be viewed as a substitute for in-depth analysis, but it does serve as a “ballpark” estimate.

Read Also: How To Find Off-Market Properties in Illinois: The 4 Best Sources

Raise Capital To Fund The Deal In Illinois

Raise Capital To Fund The Deal

Traditionally, conventional buyers will get preapproved for a loan before they initiate their home search. That way, they know the budget they have to work with and which houses they can afford. Real estate investors tend to locate the property first. Doing so allows them to build a case for seeking private money loans. 

Otherwise known as flip loans, private money loans are exactly what they sound like loans offered by individuals (not institutions). Due to their nature, these loans don’t coincide with a strict approval process or steep down payment. Instead, private money lenders will front their capital to fund house flippers if they see promise in both the investor and the property.

Private money lenders will demand a premium. Interest rates can run anywhere from 6% to 12% (or more). Private money lenders will also require a promissory note and a mortgage (or trust deed) to protect their investment. However, private money terms are usually worth accepting if it means securing a great deal. It is typically better to pay higher interest rates than to lose out on a deal altogether.

While private money is a good source of capital, it’s not the only way to finance a deal. Thankfully, Illinois real estate investors have several options to choose from. If private money isn’t available, investors may resort to:

Close on the house in Illinois

Close on the House

After raising capital to fund the deal, it’s time to close on the property. Closing on a house in Illinois involves several steps, which may include, but are not limited to:

  • Contract Negotiations: After both sides have negotiated and come to terms, they will sign a purchase agreement.
  • Attorney Review: Illinois is an attorney state, which means real estate transactions aren’t typically subject to escrow. Instead, licensed attorneys representing both sides of a transaction are responsible for preparing and reviewing legal documents and overseeing the closing process.
  • Property Inspection: The buyer will have the property inspected to identify any contract-breaking issues that need to be addressed before the closing is complete.
  • Title Search: A title search will be conducted to ensure the seller has a clear title to the home and that there are no liens on the house or issues that may call into question who the owner is in the future.
  • Closing: The buyer and seller will sign all the necessary documents to transfer ownership of the home. Once everything is signed and the closing costs are paid, the seller will hand over the keys to the property, and the buyer will provide payment for the purchase.
  • Recordation: The closing documents will be sent to the county Recorder’s Office and serve as the official title record.

Renovate the property in Illinois

Renovate the Property

The ultimate goal should be to turn the investment property into the most desirable home in the neighborhood — but only by a slight margin. Upgrades that are too extravagant will put the project over budget, and improvements that don’t separate the home from the rest of the competition will relegate the asset to mediocrity, ultimately hurting the sales price.   

The best way to renovate a home under budget is to choose the improvements with the best return on investment. Remodeling Magazine named the following renovations the best for recouping costs in the Midwest region of the United States:

  • Garage Door Replacement: It costs about $4,046 to replace a garage door, but investors can expect to recoup about 93.9% ($3,801) of the initial investment when the home sells.
  • Manufactured Stone Veneer: It costs about $11,008 to install manufactured stone veneer, but investors can expect to recoup about 90.1% ($9,923) of the initial investment when the home sells.
  • Vinyl Window Replacement: It costs about $20,372 to replace and install vinyl windows, but investors can expect to recoup about 68.4% ($13,939) of the initial investment when the home sells.
  • Midrange Kitchen Remodel: It costs about $28,544 to remodel a kitchen with midrange appliances and materials, but investors can expect to recoup about 68.3% ($19,509) of the initial investment when the home sells.
  • Steel Entry Door Replacement: It costs about $2,196 to replace a steel entry door, but investors can expect to recoup about 64.6% ($1,418) of the initial investment when the home sells.

A traditional flip will require more work than the projects listed above, but they should give you a good idea of where to put your money first.

Read Also: Estimating Rehab Costs: (Ultimate) Investor's Guide

Resell the house in Illinois

Resell The House

Take every precaution necessary to sell the house quickly and for as much profit as possible. The faster you can move inventory, the more you will save on everything from property taxes to holding costs. In doing so, do not hesitate to hire a real estate agent and stage the property. Both services will cost money upfront but are well worth the investment.

Staging, on the one hand, can sell a property fast and for more money. According to a survey conducted by the International Association of Home Staging Professionals and covered by the National Association of Realtors, “staging helps sell homes three to 30 times faster than the nonstaged competition. Further, staging can help increase the sale price by up to 20% on average.”

Realtors and real estate investors have the same impact as staging. While it’s true that hiring another real estate professional will add to home selling costs, their involvement and knowledge of the area can help sell an investment property faster than anything else.

Read Also: What Is Home Staging And How Can I Use It?

*For in-depth training on real estate investing, Real Estate Skills offers extensive courses to get you ready to make your first investment! Attend our FREE training and gain insider knowledge, expert strategies, and essential skills to make the most of every real estate opportunity that comes your way!

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How To Find Houses To Flip In Illinois

The median home value in the United States is about $327,514 — only a few thousand dollars short of all-time highs. Prices are exorbitantly expensive, which begs the question: Where can investors find houses to flip in Illinois?

Despite today’s high prices, there are plenty of ways to find houses to flip, not the least of which include the following strategies:

  • Search Public Records: Foreclosures are public records in most states. Visit your county’s Recorder’s Office to browse the latest homeowners who are falling into distress and gather their contact information.
  • Attend Foreclosure Auctions: Banks often hold auctions to recoup any losses brought about by unforeseen foreclosures. Assets are often sold at a discount and may represent an opportunity for flippers, especially in Illinois, where lender-purchased (REO) foreclosure sales comprised 3% of all sales, according to ATTOM Data Solutions.
  • Direct Mail Campaigns: Obtain a list of distressed homeowners or choose an entire neighborhood you hope to invest in. Send physical mail to each address and inform the recipients of your intentions. Let homeowners know you are looking to buy and can act quickly. The number of responses will vary, but all it takes is one response to make the campaign worthwhile.
  • Identify Poorly Kept Homes: Neglected homes can be a sign that owners are no longer interested in the property. Therefore, if you see any homes that have been neglected for too long, you may have located a motivated seller.
  • Network: Go out of your way to network with real estate professionals. Attend meetings and talk to agents to get a foot in the door.
  • Search MLS Listings: Those with access to the MLS can search listings to identify distressed homeowners or foreclosures. Although, MLS listings (distressed or not) will coincide with competition.

Read Also: How To Get MLS Access: The (Ultimate) Guide

Do I Need A License To Flip Houses In Illinois?

You do not need a real estate license to own and operate a flipping business in Illinois if you are not acting as a real estate agent or real estate broker. As a result, real estate investors in Illinois need to exercise full transparency.

If you are planning to do major renovations or construction work on the properties yourself, however, you may need to obtain a general contractor's license. It is important to research and adhere to all applicable laws and regulations before beginning any house-flipping activities. 

How To Flip A House In Illinois With No Money?

You can flip a house in Illinois if you don’t have any money; you just need to know where to get some. Let’s take a look at the most popular ways investors flip houses without using any of their own money:

  • Private Money Lenders: As previously discussed, private money lenders will fund the entirety of a deal.
  • Hard Money Lenders: Not unlike private money lenders, hard money lenders will finance an investor’s deal. Hard money lenders aren’t all that different from private money lenders, with one exception: they are a little more organized.
  • Wholesaling: While it’s not technically a flip, wholesaling is a real estate exit strategy investors may initiate without any money. Instead of buying a property, wholesaling involves a contract between the owner of a home and the investor. Otherwise known as a “purchase and sale agreement,” the contract gives the investor the right to buy the property (and nobody else). The investor then sells their right to buy the home to another buyer for a small fee.

Best Cities To Flip Houses In Illinois

Illinois has several cities that could be considered great places to invest. However, some cities have set themselves apart from the competition. Below you’ll find some of the best cities in Illinois that investors may want to consider flipping homes in:

  • Chicago: As the largest city in the state, Chicago has the most opportunities for investors to take advantage of a diverse market. With somewhere in the neighborhood of 3,189 active foreclosures, those learning how to flip houses in Illinois shouldn’t have a hard time finding an investment property. That said, Chicago investors may want to consider investing in rental properties, especially with how high rental income is at the moment.
  • Naperville: Located within Chicago’s metro, Naperville is growing in popularity amongst those who prefer suburban neighborhoods. The housing market in Naperville is supported by a high median home value that’s increased for the better part of a decade and a growing population, which should provide plenty of demand for investor inventory.
  • Rockford: As a secondary city, Rockford was a beneficiary of the mass exodus out of primary cities during the Coronavirus. It has a relatively affordable housing market and a growing population, which makes it a good candidate for house flipping. Rockford’s $128,876 median home value should continue to attract buyers as long as nationwide housing prices remain near historic highs.

Final Thoughts On Flipping Homes In Illinois

Learning how to flip houses in Illinois can lead to a profitable venture, as evidenced by the state’s steadily growing real estate market.

However, much like realizing success in every other state, Illinois real estate investors need to mind due diligence, mitigate risk, optimize profits, and put in a lot of hard work.

If you're planning to flip homes in Illinois, it's important to do your research and carefully consider all these factors before making any investment decisions. 

We invite you to join our free training program at Real Estate Skills to equip yourself with the knowledge, insights, and strategies proven to generate substantial returns in the house-flipping industry. Don't miss out on the opportunity to capitalize on Illinois' vibrant real estate market. Sign up for our training today, and start your journey to financial freedom through successful real estate investment!

*Disclosure: Real Estate Skills is not a law firm, and the information contained here does not constitute legal advice. You should consult with an attorney before making any legal conclusions. The information presented here is educational in nature. All investments involve risks, and the past performance of an investment, industry, sector, and/or market does not guarantee future returns or results. Investors are responsible for any investment decision they make. Such decisions should be based on an evaluation of their financial situation, investment objectives, risk tolerance, and liquidity needs.

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