According to ATTOM reports, almost 95,000 homes underwent a flip during 2021’s third quarter, showing 5.7% of all sales. However, the average gross profit on flipped houses was around $69,000 during that quarter, a 1.6% decrease compared to the previous year. Besides, house flippers’ return on investment fell to 32%, the lowest level since early 2011 and a sizable drop from a year prior.
Statistics show a wide contrast in the profits home flippers earns in different locations. Balancing Everything report says that the following cities were among the best for flipping a home previous year:
Of course, these areas may fall beyond your possibilities. Nevertheless, take a magnifying glass to home sales and house flipping profits in your location. Maybe you need to venture an hour out of your zone to look for a more profitable area to flip a house.
Additionally, you should pay attention to the neighborhood where you want to flip the house. Before investing, figure out what is the income level, and what is the school district like? What about the crime rate? Keep in mind you can radically boost a dirt-cheap home, but it won’t sell as quickly if it is located in a neighborhood with a high percentage of burglaries. Also, be wary of locations where homes are selling at a high rate. This can mean the local economy or the neighborhood conditions are pushing tenants out.
Significant networks like HGTV have popularized home flipping, but 30-minute recaps of only successful projects fail to capture the actual costs of flipping homes. So let’s start with exploring home improvement costs.
Below is a table of breakdowns of the average costs of various home improvement projects with the percent of costs recouped. Remember that these averages are only guides, as prices can vary significantly by location and materials.
As you can see, these projects returned, on average, 53% to 72% in cost recouped. So if you depend on financing to pay for the renovations, these costs will also hurt your bottom line. Explore all possible options, such as a home improvement loan, second mortgage, and credit to finance your house flip.
You want to care that you don’t overstrain yourself. Also, you don’t want to make the crucial mistake of thinking you’ll save money by doing a lot of the work yourself, so you spend more on materials. Think rational: if you’ve never renovated a bathroom before, it may take much more time than a professional would take. Time is money when you pay interest for your financing. It may have been less costly to hire a professional from the get-go, especially if you need to ask one to redo your work.
Of course, you can do some cosmetic upgrades like painting and stripping woodwork by yourself. But leave projects such as plumbing, electrical and structural changes to the professionals. Additionally, don’t just go for the cheapest labor. This is a significant investment you’re making, and you’ll need the right talent. Quality is a must. So do a thorough search for contractors and check online reviews. Also, ask your friends, family, or colleagues for any recommendations.
You should factor in the size of the home as well. After all, a renovation on a large house will cost more than the same project in a smaller one under it, requiring more materials. It’ll also take more time, which, as mentioned earlier, is valuable if you borrow money for this investment.
There are a lot of mistakes freshmen house flippers could make. Some important things to avoid:
However, if you want to own real estate and profit from that but do not manage all these routines, then real estate income funds may become a perfect option. LBC Capital income fund invites accredited investors to earn 8% of stable annual return with monthly distributions.