Is House Flipping still profitable in this current market? Below we will look at why flipping has become more of a challenge in the past few years and how we can still find good deals in this current market.
Investors are not seeing the availability they used to with homes. Fixing it up and quickly putting it back on the market is not getting quite the returns it used to.
Finding a home to buy in the first place has become increasingly more difficult. With record low inventory of homes and foreclosures, rising competition for whatever homes are available means even shoddy homes in terrible condition are selling for a fortune. Plus, material and labor shortages have made rehabs costlier.
According to real estate data provider Attom, the gross profit on a typical home flip transaction was $68,847 in the third quarter, down from $70,000 a year before. That is a return on investment of 32.3%, down from 43.8% a year earlier, its lowest point since 2011. There were 94,766 single-family houses and condominiums in the United States that were flipped in the third quarter of last year, the most homes flipped in a quarter since 2006. The areas with the most foreclosures this past summer with current opportunities for distressed home flips include:
If you do not work in these markets that does not mean flipping is out of the question. It just means there is more competition for homes that are sold under value.
Some people who flip houses work with agents that handle real estate owned (REO) property up for sale due to a loan default or foreclosure. They are also looking at real estate wholesalers, estate auctions, and sheriff’s sales, and signing up for a multiple listing service, which carries a fee but provides a thorough and convenient list. Do not forget the online classified ads as well.
Thanks to the surge in buyers during the pandemic, both existing and new home inventory has been extremely low throughout 2021, and it is likely to stay that way throughout 2022.
One of the main reasons for the low inventory is that homeowners have been hesitant to list their homes for sale, as there is no guarantee they will be able to find an affordable home to purchase—or a rental to lease. New home construction is not keeping up with the surge in demand, either.
There have been huge issues with the supply chain, which has made construction materials more expensive and harder to come by. That is not likely to change next year, as supply chain issues are still ongoing, and the rapidly increasing home prices make it even less likely that current owners will sell their homes and add more inventory to the market.
In short, yes you can still do flips in this current market, you just need to know where the deals are, and they may not always be in your city. At Legacy, we can teach you how to find the deals, even if they’re not in your local market.
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