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The Ultimate Guide to Flipping Houses in Illinois

You might have heard of successful house flipping businesses that make it seem like easy. But there's a sweet science to house flipping. Want to build your own Illinois house flipping empire? Read our guide to house flipping in the Prairie State.

You might have heard of successful house flipping businesses that make it seem like easy. But there's a sweet science to house flipping. Want to build your own Illinois house flipping empire? Read our guide to house flipping in the Prairie State.

You might’ve heard stories about a house flipping empire and thought it’s the way to go when investing in real estate. However, it isn’t as easy as you may think. It’s tricky to find the right house to flip and maximize your profits.

If you’re considering flipping houses in the Prairie State you should do your homework before getting started to make a sound investment.

2019 Illinois Housing Market Analysis

Before you start investing, you must learn as much as you can about the Illinois housing market. According to data from Zillow, the median home value in the state is $181,100 while the median listing and sale prices are $239,900 and $200,200 respectively. The Illinois housing market is leaning toward the seller’s side making it heaven on earth for house flippers.

Home values in this state have appreciated 4.1% during the last year while experts forecast another 2.5% rise in value within the next year. Home value appreciation rates make it a safe investment for most house flippers — if they play their cards right. Houses stay on the market an average of 125 days, something you must take into account. House flippers like to move fast, but in Illinois it may take you longer to sell the property than you expect.

The median montly rent is $1,527, which is higher than the national median of $1,485. This makes Illinois ideal for house flippers considering rental properties.

Still, there’s no one-size-fits-all formula to follow since the Illinois housing market varies based on the region and even city basis.

For example, the median listing price in Naperville is $442,000, but just $98,250 in Rockford. You should consider partnering with an experienced local real estate agent to learn about the best markets for house flipping in the Prairie State and to boost your profit margins.

How to Tell If an Illinois Property Is a Good Investment

While you might want to invest in the first cheap property you find, you must consider several factors before pulling the trigger. Besides pricing, you should weigh the location and condition of the property. Since your investment property will need some tender love and care, make sure you can recover your investment and earn profits once you sell the house.

Before buying any property, you should compare it to similar houses on the market and in the neighborhood. If you’re unsure how to do this yourself, consult a real estate agent who can prepare a comparative market analysis for the property.

You should also consider the necessary repairs and the time it will take you to fix the house. Those costs might make the property too expensive.

Consider investing in properties with features like a huge backyard, spacious kitchen, great location, as well as others that are in high demand with Illinois buyers.

If you’re a newbie house flipper or at least new to the Illinois market, you should consider consulting a local real estate agent for guidance when searching and assessing potential flipping investments.

How to Turn a Profit When Flipping an Illinois Property

Turning a profit when flipping houses will come down to crunching the numbers and setting your own boundaries to protect your ROI. You must learn to balance the level of risk and reward in every investment.

Successful house flippers stick to follow the 70% rule to learn how much they can afford to pay for the house. According to this rule, investors shouldn’t pay more than 70% of the After Repair Value (ARV) minus the cost of repairs of the property they want to flip. If you follow this rule, you’ll avoid overpaying for a property and end up with decent ROI.

Let’s say that you’re looking to flip a house in Chicago and want to sell it at the median price of $298,900. The house needs about $50,000 in repairs. Under the 70% rule, you would multiply $298,900 by 70% to total $209,230 minus the $50,000 in repairs. The most you should pay for the property turns out ot be $159,230.

Even if you’re able to secure the property for this price, you should consider your market conditions, how long it will take you to repair your home, among other factors that may influence your profit.

Paying Cash vs. Taking Out a Loan

When flipping houses, paying cash is the best option to avoid losing money. However, you may consider financing your flip by taking a HELOC, HEL, or mortgage. Before pulling the trigger and applying for financing, look at your house flipping project and finances.

Remember that you must meet your lender’s minimum requirements, such as having a down payment, good credit history, and steady income before applying. Keep in mind that when you take out a loan, you’ll be paying interest and making loan payments while you repair the property. Once you finish the repairs, you may end up listing your property at the wrong time of year and end up pricing it below your projected price due to market fluctuations.

Let’s say that you buy a Chicago home to flip for $159,230 and plan to spend $50,000 in repairs. If you sell it for $298,900, that’s an easy $89,670 in profit, right?

However, after you begin to repair the property, your contractor discovers the house needs some foundation work, a new roof, and bathroom and kitchen renovations totaling an additional $60,000. So far you’ve spent $269,230 getting the house ready for the market.

You list the property during a slow season for $298,900 and sell it for $290,000 after negotiating with the buyer. You earn a gross profit of $20,770. After subtracting the $14,800 you paid in closing costs and about $5,375 in mortgage interest, your potential house flipping turn out to be only $595.

Before flipping any home, weigh the risk and reward of the investment. You may expect to spend a certain amount in renovations but unexpected repairs can put a dent in your profits. You should also remember that the expenses of financing can also lower your net profits.

5 Best Cities in Illinois for House Flippers in 2019

Becoming a successful house flipper requires making savvy investments. The first step is finding the hot markets in the state. It doesn’t matter if you’re a newbie or seasoned house flipper, you must learn the best places to flip houses in the Prairie State.

Chicago

This city is one of the hottest flipping markets in Illinois. House flippers earn average gross profits of $81,162. This market’s promising average flipping profits and its high demand as the third largest metro area in the United States make it a great option for novice and seasoned investors alike.

Wheaton

The median listing price in this city is $418,000 while the median home value is $344,800. This market is leaning toward the seller’s side making it ideal for house flippers who want to make a fast profit. Wheaton is a family-friendly suburb that’s in high demand improving your odds of securing a great offer on your flip.

Bolingbrook

This market is very hot helping sellers make hefty profits. Bolingbrook homes appreciated 5.2% in value last year while experts forecast a rise in home value of 2.0% within the next year. Bolingbrook’s diverse community attracts young professionals and families alike making it easier to sell your flip faster.

Romeoville

This city may be the best option for newbie and seasoned house flippers looking for a cheaper investment. The median listing price in this city is $199,000 while the median rent price is $1,466. The affordability of this market and the potential of developing rental income makes it ideal for house flippers looking to diversify their income streams.

Wilmette

The median listing price for homes in this housing market is $720,000 making it one of the most lucrative Illinois house flipping markets. Wilmette is in high demand by families looking to live in a suburb close to central Chicago since it’s only 14 miles from Downtown. This market’s high demand and impressive potential flipping profits make it a great opportunity for seasoned and novice house flippers looking to break into the high end Illinois housing market.

Next Steps for Illinois House Flippers

Building a house flipping empire will come down to crunching the numbers and finding the best places to buy houses. Novice and seasoned house flippers looking to enter the Illinois market should consider working with an experienced realtor such as a Clever Partner Agent. They are top performers in your market who understand your needs as a house flipper.

An expert can point you in the right direction to find the best investment properties. Then when it comes to selling your houses, a Clever Partner Agent will offer their full services for a fraction of the typical cost. Our agents have agreed to charge a $3,000 flat fee or 1% of the final sale price for sales of $350,000 or more.

House flippers need the best real estate expert watching their backs. When you work with a Clever Partner Agent, you’ll ensure a flawless home buying and selling process while boosting your profits.

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Luke Babich

Luke Babich is the co-founder and Chief Strategy Officer of Clever Real Estate, the free online service that connects you with top agents to save money on commission. He's an active real estate investor and licensed agent in St. Louis, with 22 units currently. Luke graduated from Stanford University and subsequently ran a historic data-driven campaign for University City City Council. Luke's writing has been featured in Homeland Security Today, Mashvisor, Payments Journal, and Bigger Pockets.

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