In Q2 2024, state-wide flippers earned an eye-popping gross profit of $95,000 per flip! Experts predict this trend will continue through 2025. Clearly, there’s no time like now to start flipping houses in Chicago, IL.
With median home prices around $350,000 and 59.4% gross profit on flipping, you can earn up to $206k if you act fast. So how do you start?
First, scout for distressed or foreclosed homes. Next, renovate and list your flipped home just in time to cash in next year’s booming market. Don’t wait, capitalize on the Windy City’s house flip goldmine!
What Does Flipping Houses in Chicago Mean?
House flipping is an investment strategy in which you buy an undervalued home to renovate and sell for a better price. This way, you fix and flip to earn profits.
As a Chicago flipper, you can adopt the following practices:
- Buy Properties at a Discount: Go for distressed properties such as foreclosed and probate homes. You can find such homes for sale in Chicago, IL at a lower cost than the market value.
- Sell For Sale By Owner: You can list on the MLS for a small flat fee and sell FSBO. This saves thousands of dollars in Realtor commissions.
How to Flip a House in Chicago, IL?
It is key to know the right strategies to start flipping houses in Chicago. Here are 6 easy steps:
1. Select a Market
When flipping homes in Chicago, check local economic conditions, housing demand, and property prices. These factors can help you select the best market to flip houses in Chicago.
If you want higher returns, Chicago offers high gross profits. Last year, the city witnessed profits of $112,000.
For median sale prices, check for growth in home sale prices. Also, monitor market competitiveness — the higher the score, the faster homes sell.
2. Arrange Your Finances
Acquisition cost is the biggest expense when you flip houses for sale in Chicago. If you have enough funds, you can buy for cash and get rid of the interest cost.
If you don’t have or don’t wish to invest your funds, you can still flip houses in Chicago with no money. You can get a mortgage or a HELOC to finance the purchase.
However, a mortgage can increase your costs. To maximize your profits, shop for lenders who charge lower interest. Additionally, a mortgage calculator in Chicago can be helpful to compare lending rates.
3. Find a Property to Flip
Scout for the best areas in Chicago to flip houses. Here’s how you can zero in on a distressed home or fixer-upper in your city of choice:
Browse the MLS:
The MLS can simplify your search with filters such as price, location, and property condition. You can look for undervalued properties that need repairs or are in high-demand areas.
Properties that have been on the MLS for 60 days or more signal a faster deal. These sellers are comparatively more eager to negotiate and close a deal.
Use Direct Mail Marketing:
Direct mail has a higher response rate than email. Surprisingly, 42.2% of mail recipients read direct mail. It offers an average of 29% return for campaign efforts.
Direct mail includes postcards, yellow letters, and newsletters. You can circulate them at your desired frequency to target specific demographics and geographic areas.
Visit Bank Auctions:
Auctions provide opportunities to buy foreclosed properties. You can get such homes below their market value. Banks hold these auctions to sell the houses as fast as possible.
4. Follow Home Flipping’s 70% Rule
This rule states that you shouldn’t pay more than 70% of the property’s after-repair value. A home’s ARV is its value after it is fully repaired.
Use this formula: (ARV * 70%) – Repairs = Maximum Purchase Price.
For example: If the ARV of your home is $300,000 and the estimated renovation cost is $30,000, your purchase price will be $180,000.
» Property Value Estimator: Find your home’s estimated worth within a minute.
5. Conduct a Home Inspection
It can be costly to neglect a home inspection as distressed homes are likely to have issues with roofing, pests, and plumbing. 86% of inspections reveal at least one issue.
A home inspector in Chicago can help you identify fundamental issues. It will increase the chances of selling your house for a higher price.
6. Sell Your Flipped House
When you’ve finished flipping houses in Chicago, it’s time to look for buyers! You can list your home on the MLS for maximum exposure.
If you list via Flat Fee MLS Chicago companies, your flip will reach more buyers. You can also save 3% on the listing agent commission.
How Much Does It Cost to Flip a House?
The average cost to flip a house in Chicago includes the costs to renovate, hold, and market the property.
- Renovation Costs: This can go up to $52,000. It includes renovation of the roof, electric system, and plumbing.
- Holding Costs: These costs include maintenance fees, HOA (about $300), and utility bills. Traditionally you should budget from 1% to 3% of the home’s value or $1 per sq. ft.
- Rehab Costs: These include labor and material expenses, home inspection costs ($300 to $500), and necessary permits.
- Marketing Costs: You will have to pay to market the house, list it on the MLS, create flyers, and more.
- Closing Costs: Typically, closing costs are 5% to 10% of your sale price. It includes appraisal, title search, attorney fees, etc.
- Property Taxes: Illinois state average property tax rate is 2.07% of the home’s assessed value.
Can I Flip Houses With No Money?
Yes, it’s possible to flip houses with no money. Here are your options:
- Hard Money Lenders: With hard money loans, you can get quick capital at higher interest rates. Individual investors or companies provide such loans at 12% -18%.
- Private Money Lenders: These lenders provide money to potential flippers at an interest rate of 8% to 10%. You can get additional funds from private lenders on top of your hard money loan.
- Property Wholesaling: If you find a seller who wants to sell a distressed home as is, you can enter into a contract with them. You can assign this contract to a buyer for a higher price and receive the price difference.
Can I Sell Flipped Homes in Chicago on the MLS?
Yes, you can sell flipped houses in Chicago on the MLS.
If you have used hard money to finance the house, you have to sell it fast or refinance to hold it. This is because the interest and maintenance costs are high.
Listing on the MLS with Houzeo will help you quickly sell the house for a flat fee. This way you can save 3% in agent commissions and get 100% virtual services.
Is Flipping Houses Worth It?
Yes, home flipping is becoming increasingly popular. In 2023, 8% of home sales were from flipping, up from 5.7% in 2016. The average gross profit was $95,000 in Illinois. It’s clear: flipping houses is a lucrative investment opportunity.
Start looking for suitable properties on the MLS. With the current market conditions, there’s never been a better time to flip houses for massive returns!
Know How to List on the Houzeo MLS in 5 Easy Steps
We’ve got you covered. Check out how you can list your home on the MLS with Houzeo.
Frequently Asked Questions
How to flip houses with no money in Chicago, IL?
If you don't have enough money or don't want to invest your own money in the flipping business, you can flip without money.
You can use credit sources such as hard money lenders, private investors, wholesalers, and home equity.
What type of loan is best for flipping a house in Chicago, IL?
Since house flipping in Chicago is not a long-term project, short-term loans are the best option. These include private lenders, cash-out refinances, and home equity lines of credit.
How long does it take to flip a house?
The average time to flip a house is 90 to 180 days. Typically, it depends on the extent and cost of renovations, market conditions, and the type of property.
Do I need a real estate license to flip houses in Chicago, IL?
No, you don’t need a real estate license to flip houses. But a license allows you to list and flip homes on your own. Plus you can bypass agent commissions.
