Is Houston an appealing market to flip a home? Well, it is an enormous city with plenty of older homes to flip, so you’re definitely looking in the right place!
That said, other factors should be taken into consideration for your big decision to become a real estate investor. Reducing risk, minimizing expenses, and maximizing profits are the priorities when entering the house-flipping market.
From the vast number of potential properties to the low median home values, you are highly likely to find yourself a top-notch investment property to flip.
If that sounds like an investment opportunity you’re interested in, here’s all you need to know about flipping houses in Houston, TX, and how to do it right!
- Why Should You Consider Flipping Houses in Houston?
- Is Flipping Homes in Houston Profitable?
- Where To Flip Houses in Houston: Best Neighborhoods
- Home-Flipping in Houston in 5 Steps
- Costs of Flipping Houses in Houston
- Do You Need a License to Flip Houses in Houston?
- Other Cities to Look At for Profitable House Flipping
- Wrapping Up
Why Should You Consider Flipping Houses in Houston?
As the fourth largest city in the nation, the Houston area brings in people from around the world to experience its Texan heart. If you’re thinking about flipping here, consider some of these positive factors:
- Top ranking for house flipping: ATTOM Data’s 2021 house flipping report ranked Houston as the ninth best place in the nation for house flipping.
- Low housing prices: Texas housing prices are lower on average than around the rest of the country, especially in the major metropolitan areas.
- Strong economy: Texas’ economy ranks in the top ten states consistently, largely due to job stability and work opportunities.
- Growing city: The Houston population is growing and more businesses are moving to this city or nearby cities.
Is Flipping Homes in Houston Profitable?
Although the popularity of home flipping has increased, the gross profits aren’t following nationally. Gross return on investment (ROI) has dropped five percent since 2021.
These are national averages, so while they don’t necessarily predict your project’s success, it’s important to take them into consideration.
Houston does stray from many other national averages. With lower average home values, it may be a great time to buy and make a profit as the market shifts.
Be cautious of cheaper homes that are less than $150,000, though. It will often be difficult to increase the after-repair value enough to make it worth your time.
Where To Flip Houses in Houston: Best Neighborhoods
You must be strategic when choosing a home to flip in Texas. This isn’t an exact formula to follow, but you’ll want to pick a good location in a stable neighborhood that has interested buyers looking for newer homes.
The city of Katy was built when a railway station popped up in the 1890s. It sits just west of downtown Houston. The suburb offers many older homes from that era prime for flipping.
The town has doubled in size in the last decade and continues to see similar growth. Home demand follows this trend, although 2023 has seen stagnation in market prices.
Spring is a northern suburb of Houston in Harris County. It’s the home of many large companies, such as T&T Foods and PFS Packaging Company, so it supports a strong job market and low unemployment rate.
Redfin rates the Spring housing market as hot even in a down overall market, showing its stability.
With many older homes in the area selling for less, it’s a great place to consider. Expect competition when looking for the right property there.
3. The Woodlands
The Woodlands is a popular development area due to its extensive recreational activities. Most homes in this area were constructed in the 1970s, and while many have been renovated, there are still some on the market with great potential to flip.
Home values in this area are much higher than in other areas of Houston, so expect the initial investment to be higher than these other neighborhoods.
The high demand does offer more security for when you want to sell. Homes maintain their value well here, lowering the risk of your investment.
Cypress is further northeast of Houston in Harris County. It was developed in the 1990s but still offers the feeling of its rural roots. As Houston grows, these further suburbs are gaining popularity and growing as well.
The values of homes in this area are still relatively low compared to some of the neighborhoods closer to Houston downtown. It has an older population and will attract more families looking to settle into family homes with more space.
You can expect larger rural homes in this area, which may offer bigger projects for flipping.
5. Sugar Land
Just southwest of downtown, Sugar Land ranks as one of the best places in the nation to live. It’s no surprise that it’s one of the fastest-growing neighborhoods in the state.
The latest home buyers are bringing greater affluence to the area, making it a good place to purchase one of the older homes to flip. A majority of the original homes in the area were built in the 1970s and 1980s.
Homes here have consistently increased in value over the past five years. It’s a competitive housing market, so you may struggle to find low-cost homes to invest in.
Expect a substantial initial investment, but it’ll most likely hold its value because of the location.
Home-Flipping in Houston in 5 Steps
Houston, like many other Texan cities, has a huge housing market that may feel overwhelming at first glance.
It’s important in the house flipping process to find the right property for the right price and ensure you maximize your profit.
Step 1: Find Your Property
The fourth largest city in the nation has an expectedly massive housing market. Your best option to start looking for the right property is to narrow down the neighborhoods that you’re interested in buying. You’ll want neighborhoods with growth and ideally cheaper, older homes.
Search for properties on multi-listing service websites. Many of these are free to use, but others will only be accessible to realtors. It may be smart to use a real estate agent to help you in the process.
Consider these MLS sites to start your search process in Houston:
- Happen Houston
Step 2: Learn Everything You Can About the Property
A low price on a property is exciting but should be questioned thoroughly.
If you find a property you think you want to flip, find out everything about it. This may seem obvious, but missing one small detail can cost you a lot of money.
A dilapidated property usually hides bigger issues that can turn it into a money pit. To prevent yourself from buying into one of these, hire a contractor or home inspector knowledgeable in spotting such problems.
Step 3: Offer, Purchase, Plan
If you’ve got a property you like, get ready to make an offer and purchase. Before you begin, ensure you’ve thoroughly planned your expenses and the estimated value of the home once you finish.
You can utilize the 70 percent rule to calculate your maximum purchase price compared to the maximum sale price so it’s possible to minimize your risk of loss.
Fund your flip with one of the reputable hard money lenders around if you need a hard money loan.
Step 4: Flip!
Start with the major repairs and move to the minor repairs later. This is to protect your investment in case other major issues come up during the process, which is common.
Look into what features are in high demand and increase the market value of homes in the Houston area. According to RedFin, these are the top value adds right now:
- Gas fireplace
- Front patio
- Fenced back yard
- Back patio
- Large walk-in closet
- Private driveway
- 2 sinks
- Flex room
- 5 bathrooms
Step 5: Sell
It’s time to put your renovated property on the market. Most first-time real estate investors will use a realtor to help with this process. While it’s costly, it ensures the process is done right and you have access to local resources and knowledge.
If you plan to continue flipping houses in Houston, study what the realtor does and learn how to navigate the sale so you can avoid these fees in the future.
If you choose to sell yourself, you’ll want to list the home in as many places as possible. More eyes means more offers.
Costs of Flipping Houses in Houston
The costs of flipping homes can be split into four major categories: initial investment, rehab costs, hidden costs, and selling costs.
The home acquisition cost and rehab costs are unavoidable but can be minimized by careful planning and calculation.
Ensure you don’t overspend on your initial purchase price by using the 70 percent rule. As for rehab costs, know that contractors charge from $20 to $120 per hour.
Three percent of your profit is a good figure to set aside for hidden costs throughout the process, such as marketing costs, holding costs, and capital gains taxes.
As for selling costs, the general estimate is between two to five percent of the home’s final value. These cover real estate fees, transfer taxes, property taxes, and insurance fees.
Some tips to lower your costs are:
- Purchase homes that are foreclosed or on auction, these tend to be cheaper.
- Use sweat equity, or personal labor, to lower rehab costs.
- Hire a reliable contractor to minimize repairs you might have missed initially.
- Flip the house quickly.
Do You Need a License to Flip Houses in Houston?
House flippers do not need a license anywhere in Texas. You’re free to house flip in Houston with no credentials!
However, a real estate license is an option worth considering. Having a real estate license can help make the process cheaper and easier for you, as well as increase the trust of buyers when you do sell.
Other Cities to Look At for Profitable House Flipping
Houston may check some boxes for your house flipping journey, but there are other great cities that offer something a little bit different:
- Flipping Houses in Dallas: Dallas offers a similar market to Houston but with a different feel. See if big city Dallas fits your vibe more!
- Flipping Houses in Austin: Austin’s seller market is predicted to boom soon. Here’s all you need to know about it.
- Flipping Houses in Chicago: Texas isn’t for you? Well, Chicago is a similarly large city with older homes in burgeoning neighborhoods. Consider this beautiful city for your house-flipping adventure.
Real estate investing is a big decision to make, so you’ll want to feel prepared and confident when making the leap. Houston is a wonderful city to start with, thanks to its older homes and low housing costs.
As more businesses move to Houston, the job market will grow and the housing demand will increase. Buying soon, even in a down market, could set you up for a successful flip.
If this article helped you with your Houston investment properties and house flipping plans, be sure to comment or share it with fellow real estate investors!