Profiting from the flip; it can happen, but not everywhere

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Published Date 9/28/2023

Flipping is about a lot more than turning over pancakes or going crazy. It’s about the purchase of a run-down home in a desirable neighborhood, fixing it up, and selling it for a fat profit. Just sample a bit of HGTV and you’ll find it’s the mantra of more than one reality show.

Realtor.com’s Clare Trapasso reports that after profits took a hit as the housing market slowed and investors exited the market, flipping is once again bringing in a stronger return on investment, according to a recent report from real estate data firm ATTOM.

“Investors typically made a gross profit of about $66,500 on a flip in the second quarter of this year, according to ATTOM,” says Trapasso. “That number represents the difference between what they paid for the property and what it sold for—and does not subtract what they spent to remodel the home. Repairs and updates can cost 20% to 33% of the home’s sale price.”

She explains how, for the second quarter in a row, profits rose. “They were up 18% from the first quarter of this year but still down 35% from the same time last year. Returns on investments stood at about 27.5%, well shy of the 61% high reached two years ago. Finished flips sold for a median of $308,500 nationally.”

“Fortunes for investors who flip homes for quick profits are showing more signs of turning around,” ATTOM CEO Rob Barber says in a statement. “It’s still too early to declare the profit downturn over, as much will depend on whether the second-quarter market surge keeps going or whether it retreats again like it did last year.”

About 8% of all single-family home and condominium sales from April to June were flips — roughly 1 in every 13 home sales. That’s down from 9.9% of all sales in the first quarter of the year and 8.9% a year earlier. Despite this, profits rose.

ATTOM examined sales deed data of single-family homes and condos sold in arm’s-length transactions to find homes that were sold twice within 12 months, indicating a home might have been flipped. Why the recovery? It’s partly due to home prices rising instead of falling. The risk for investors is that they’ll purchase a property to flip, they’ll spend a lot of money on renovations, and then the market will turn and prices will fall before they can get the return on their investment.

The highest flipping rates tend to be in the most affordable areas, such as the South and Midwest. The Macon, GA, metropolitan area had the highest flipping rate, at 16.8% of all home sales. It was followed by Columbus, GA, at 15.3%; Spartanburg, SC, at 13.5%; Atlanta, at 13.5%; and Akron, OH, at 12.5%. (Only metros with at least 200,000 residents and at least 50 flips within the second quarter of the year were measured.)

Flippers made the highest profits in the Midwest and Mid-Atlantic regions. Akron had the highest returns on investment, at 116.7%, followed by Pittsburgh, at 112.9%; Scranton, PA, at 93.7%; Hagerstown, MD, at 86.6%; and Trenton, NJ, at 85%.

Realtor, TBWS

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