How to Write a House-Flipping Business Plan
The house-flipping and Home Renovation industry is growing for several reasons. This has elevated the need for house-flipping business plans, house-flipping business plan templates, and house-flipping pro forma financial projections. First, there are substantial profits to be made in house flipping.
Our business plan writer's diligent research into the home-flipping industry has revealed that, on average, each house-flipped yields profits of approximately $60,000. In our humble opinion, this represents a substantial reward for a few months of dedicated effort. Furthermore, the growing demand for affordable housing fuels the need for renovated homes. Additionally, the house flipping and home renovation industry is thriving because newly constructed homes often come with significantly higher price tags than refurbished ones.
In light of these market dynamics and others, many entrepreneurs are venturing into the home flipping and renovation sector. However, to fully capitalize on opportunities within this market, our recommendation, as provided by our seasoned business plan specialist, is to have a comprehensive house flipping business plan or home renovation business plan in place before entering the arena. Possessing such a document not only enhances the prospects of securing funding but also aids in maintaining a clear focus on project management tasks.
Hence, the significance of having a well-structured house flipping or home renovation business plan cannot be underestimated. Here, our professional business plan specialist shares some valuable tips and strategies to consider when crafting a business plan for this industry (10/23).
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Executive Summary for a House Flipping or Home Renovation Business Plan.
In the executive summary section of a house-flipping business plan template, business proprietors should commence with similar information as found in traditional business plans. This includes disclosing the company's name, address, and approach to home renovation for resale, whether it involves high-end fixtures at premium prices or moderately renovated homes with lower investment costs. Additionally, as advised by our home-flipping business plan specialist, business owners should briefly touch upon their projections for the number of homes they intend to renovate in the initial year. Providing this information enables the reader to gain insight into the expected volume of renovated homes the owner aims to achieve. Establishing this expectation at the outset allows the business owner to demonstrate alignment with selling, renovation, and project management strategies often elaborated upon later in the plan.
Company Information for a House Flipping or Home Renovation Business Plan.
The section dedicated to company information within a House Flipping or Home Renovation business plan should begin by elucidating the problem the company intends to address for its clientele. Subsequently, it should delve into the "Who, what, where, when, why, and Hows." In most instances, the predicament that a house flipping and home renovation business alleviates for its clients pertains to the desire or need for a new home, albeit the financial means to afford a brand-new house is lacking. In simpler terms, many individuals aspire to acquire a new home with all the modern amenities and fixtures. However, the cost of a newly constructed dwelling is often considerably higher than purchasing an already existing one. Consequently, the next best alternative becomes a home that has undergone a comprehensive renovation.
Product Description for a House Flipping or Home Renovation Business Plan.
House Flipping or Home Renovation businesses generate revenue by selling refurbished homes. Sometimes, when a renovated home does not find a buyer promptly, an additional revenue stream may involve renting out the property. Another strategic approach to revenue generation entails flipping three or four homes successively and then holding onto the fifth property. Through this method, as observed by our business plan specialist, house-flipping investors can achieve diversification by tapping into two distinct revenue streams.
Competitive Advantages for a House Flipping or Home Renovation Business Plan.
The House Flipping or Home Renovation industry has experienced substantial growth over recent years, driven by the promising profit potential it offers. Consequently, securing competitive advantages within the home flipping industry cannot be emphasized enough. Our business plan specialist has identified two primary strategies commonly employed to establish competitive advantages.
The first strategy involves utilizing high-end products and building materials during the renovation process. By adopting this approach, investors position themselves to compete more effectively with new home builders in the property market.
The second strategy revolves around an economy-driven approach. This entails renovating a home so customers can quickly complete the remaining refurbishment work at their own pace. This approach enables investors to lower the selling price while allowing buyers to finish the home improvements as they see fit.
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Location Description for a House Flipping or Home Renovation Business Plan
The choice of location for a new House Flipping or Home Renovation facility is paramount for the business's success. Our research, specific to this industry, reveals that home renovation investors frequently opt to acquire properties within specific geographic areas. For example, an investor residing in the Orlando, Florida, area may typically focus on purchasing homes nearby. This inclination is motivated by several factors. Firstly, purchasing a home in one's city reduces commuting time, enabling a relatively short journey from home to "work." Additionally, investors often prefer acquiring homes in their local area due to their familiarity with the real estate market. This local expertise contributes to lowering overall business risks.
Regarding the general location of a House Flipping or Home Renovation facility, our findings indicate that these businesses thrive in subdivision settings. Unfortunately, vacant homes are susceptible to vandalism and break-ins. By selecting homes in subdivisions, neighbors often provide an informal security presence, acting as an added layer of protection.
Target Market for a House Flipping or Home Renovation Business Plan.
A typical target market for House Flipping or Home Renovation businesses comprises individuals or families searching for a new home. New homebuyers have distinct requirements, seeking houses that have never been occupied and are equipped with new appliances and interior fixtures. However, some potential buyers desiring new homes may find them financially out of reach. In such cases, a fully renovated home offered by a professional renovator is the next-best option.
Industry Research for a House Flipping or Home Renovation Business Plan
Based on a cursory examination conducted by our business plan specialist, the home remodeling industry is the primary industry in which House Flipping or Home Renovation competitors operate. Within this sector, competitors renovate both the interiors and exteriors of homes. Furthermore, renovators may or may not own the actual properties. The industry's annual revenues amount to approximately $85 billion. Over the past five years, the industry has experienced an annual growth rate of approximately 7.5%. However, our research indicates that this growth rate may decrease to approximately 1% over the next five years. The house flipping and home renovation industry consists of approximately 130,000 different competitors, with projected profits exceeding $4.5 billion. The primary source of revenue stems from exterior additions, closely followed by room additions.
Owner and Management Section of a House Flipping or Home Renovation Business Plan
Ownership and management of a House Flipping or Home Renovation business differ significantly from other organizations. Typically, owners are individuals or partners. Specifically, ownership structures for home flipping companies often begin with one or two individuals who either perform the renovation work themselves or oversee subcontractors. Alternatively, a second structure entails these individuals serving as part-owners alongside an investor providing the funding. This approach enables investors to realize substantial profits while those responsible for finding and renovating the homes also receive a fair share of the rewards.
Funding Request for a House Flipping or Home Renovation Business Plan
Establishing a House Flipping or Home Renovation business entails substantial expenses. Business owners must purchase the properties and cover the renovation costs. Consequently, our research indicates that funding needs may range from $150,000 to half a million. Given these substantial financial requirements, home flipping professionals frequently seek assistance from hard money investors or turn to banks for loans. Another viable funding option involves securing a line of credit from a lending institution. This arrangement enables investors to access the line of credit during property renovation and purchase, with the ability to pay off the balance after the home is sold.
Financials for a House Flipping or Home Renovation Business Plan.
Financial projections and models for a House Flipping or Home Renovation business plan should commence with budgeting for property acquisition and renovation expenses. Once this foundational step is completed, business owners must determine their preferred financing method, whether it involves an investor partner or a bank loan. After consolidating this information, projections can be formulated to estimate when funding will be utilized and when property sales are expected. Once this initial phase is concluded, the business plan can be expanded to cover 12 months.
Moreover, we have observed that real estate home flippers often require customized financial models to communicate their annual profit and loss statements effectively. Typically, these professionals utilize financial models that reflect costs incurred during the first two months of renovations, with the expectation of home sales in the third month. By structuring their finances every quarter, business owners can provide a comprehensive breakdown of cash flows related to home renovation and sale.
Hopefully, these insightful tips and tricks for writing a business plan were helpful. If you need help with a business plan or financial projections, email or call us.
Author: Paul Borosky, Doctoral Candidate, MBA., Author
Owner of: Quality Business Plan, Quality Business Consultant
Date: 10/10/23