I’ve been keeping track of all of the flips going on in my East Dallas neighborhood, with many friends and neighbors playing a little game called “How much will this flip be listed for?” So far there are four flips in progress within a half mile of my home.
I figure the flips keep flipping because they haven’t flopped in the profit department … yet. And this new data from Realtor.com confirms my suspicions.
With median list prices up 13.7 percent since the start of 2021, there’s room for profit, for sure. But with high lumber, construction, and appliance costs, the margins are thinner.
“There is opportunity, but you’ve really got to be smart in where you purchase and know that market,” says Charles Tassell, a real estate investor and chief operating officer of the National Real Estate Investors Association. “Finding the right spot is the hard part right now.”
According to the data, the South and the Sun Belt are the hottest spots for making cash on flips due to high demand and a decent supply of affordable homes. Home flips are up 23 percent from last year — the highest level since 2005. Though there were more than 59,000 flips on the US market from April to June, profits are down more than two-thirds in the 150 largest metro areas.
Likewise during this period, flippers saw the lowest profits since 2008, earning about 43 percent over what they paid for the property. That is, of course, without allowing for construction costs. In the world of real estate investment, flippers usually try to make 50 percent or more over what they pay for a property.
“The overall cost of renovation projects has gone up substantially, and that’s also impacted profitability,” Tassell says.
For ROI, the places that were already seeing an influx of new demand remained popular after the pandemic hit. And flips hit the spot as most of these buyers were willing to throw down for turnkey renovated properties, especially those who weren’t able to snag new construction.
Realtor.com looked at the median profit for flips in the 150 largest metropolitan areas compared with the same time a year ago. A home flip is defined as the same property resold within 12 months of the last purchase. Metros are made up of the main city and surrounding towns, suburbs, and smaller urban areas.
Of cities in that survey, Dallas, ranked No. 3 best place to flip a home, coming in behind No. 2 Phoenix, Arizona, and No. 1 Columbia, South Carolina. For Dallas, the median list price in September was $396,500 and the median profit on a flip was $71,383. That’s up 6.6 percent from the same period.
