Real Estate News & Commentary

Flippers, Fear Not! 5 Reasons Why House Flipping is Alive & Well

Expertise: Personal Development, Real Estate News & Commentary
40 Articles Written

If you're up on your real estate news, you've probably already come across the latest RealtyTrac article from Tuesday, which reports home flipping to be at its lowest level in Q3 2014 since Q2 of 2009. The data shows that 26,947 single family homes were flipped across the nation during the third quarter of 2014, accounting for 4.0 percent of all single family homes sales nationwide, which is down from 4.6 percent in the second quarter of 2014 and down from 5.6 percent in the third quarter of 2013.

The factors contributing to this dip are varied, but likely include:

  • Reduced margins due to higher acquisition and rehab costs
  • Lower inventory of good potential flips
  • Higher risk due to tighter margins
  • Flattening home value appreciation
  • An increased appetite for flipping by your “average Joe”

Regarding the Denver market, real estate agent Rick Koentopp said, “The practice of flipping has become much more difficult. With an extremely active market, the inventory of candidates has dwindled. The appetite to do the flips is very strong, but it is harder to identify the properties. Many flippers have to potentially accept lower margins, which increases the risk that is involved.”

The Beginning of the End?

While some are hailing the beginning of the end for house flipping (see: “5 Reasons House Flipping Won’t Work Anymore“), here at BiggerPockets, home of self-proclaimed contrarians and big dreamers alike, our ears perk up at the words “won’t,” “can’t, and “shouldn’t.” We put on our creative thinking caps, search the blog, brush up on our podcast episodes, crowdsource the forums, scour our local markets, crunch the figures, and (if the numbers make sense), we make it happen.

Related: Flipping Houses: 101 Awesome Quick Tips for Success

How does the quote go?

The greatest pleasure in life is doing what people say you cannot do.

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I'm not saying house flipping still makes sense in every market, for every investor — or that it hasn't gotten harder to find the deals we could back in 2009 (when you could even find properties on the MLS that fit the house-flipping criteria).

What I am saying is that I’ve been seeing “the decline of house flipping” articles for a few years now, including BiggerPockets’ own “New Report: Is House Flipping Almost Dead?” and “Is House Flipping Dead?” — and yet, week by week, the success stories remain: in Podcast 96, Anson Young discusses flipping in Denver’s hot market, blogger Mark Ferguson covers the ins and outs of flipping ten properties at once in this article, and a cursory search of the BiggerPockets Forums uncovers this amazingly titled post: “Complete dump to freaking amazing in less than 3 months.”

Hey, people thought the Backstreet Boys‘ singing careers were dead, too.

So, while the rules may shift, and while the deals may be harder to find, let’s explore some of the reasons why house flipping isn’t necessarily dead, shall we?

5 Reasons House Flipping is Still Alive & Well

1. Average Gross Profits Are at a RECORD HIGH

What naysayers aren’t mentioning is that investors averaged a gross profit of $75,990 per flip on homes flipped in the third quarter of 2014, which represents a 36 percent gross return on the initial investment (not including rehab costs and other expenses). The average gross return was up from 35 percent in the second quarter.

“The record-high average profits per flip in the quarter demonstrate that flippers are still filling an important niche in an aging housing market with historically low levels of new homes being built,” said Daren Blomquist, vice president at RealtyTrac, regarding the uptick in house flipping profits.

“The most successful flippers are buying older, outdated homes in established neighborhoods and rehabbing them extensively to appeal to modern tastes.”

Which leads to our next point…

2. Older Homes Still Hold Great Opportunity

RealtyTrac's study found that "homes built from 1930 to 1939 yielded a 53 percent gross return on investment for flips in the third quarter, the highest gross return of any decade going back to 1930."

You may be wondering: But are older homes, even fixed up, all that attractive to buyers? Don’t youngsters want everything sparkly and new?

Perhaps surprisingly, an interesting study published this year by highlighting home buyer and seller generational trends found that younger buyers actually tend to prefer to buy older homes, accounting for a larger percentage the sales of homes built between 1912 and 1960 than any other age group and citing reasons such as “better overall value” and “more charm and character.”

But why should I cater to millennials? Aren’t they hesitant to buy homes?

The home buying trends for Millenials/Gen Y/Gen Next (no, I had not heard of this one, either) is actually on the rise, with those born between 1980 and 1995 accounting for 31% of homes sales, second to no other age group.

3. Foreclosure Filings are Up

October of this year saw foreclosure filings on 123,109 properties nationwide, including default notices, scheduled auctions and bank repossessions, a 15% increase from September. According to RealtyTrac, that's the biggest month-over-month jump in foreclosure activity since March of 2010.

Due in part to lenders trying to liquidate their REO properties quickly, this trend has driven an increase in foreclosure auctions by 24% and in bank repossessions by 22% month-over-month.

Says Blomquist, “Discounted distressed properties have become harder to find, but a recent jump in scheduled foreclosure auctions could provide more fodder for flippers in the next three to six months.”

4. Some Markets Remain Strong as Ever

Am I saying you should pack up and move to Florida to flip houses? Not necessarily, although from a -12 degree Denver perspective, that doesn’t sound too shabby.

But as with most things real estate, successful house flipping is all about knowing your market. The house flipping environment in your area may not be at the top of real estate niches to tackle, but in certain areas, it’s still going strong.

Here are some figures from RealtyTrac’s study regarding local markets:

  • Metro areas with the most flips in the third quarter were Miami (1,190 flips), Los Angeles (1,170 flips), Phoenix (1,147 flips), New York (1,070 flips) and Tampa (789 flips)
  • Metros with an increasing share of home flips compared to a year ago included Louisville, Ky. (up 117 percent), Kansas City (up 66 percent), Boston (up 40 percent), New Orleans (up 38 percent), and Indianapolis (up 35 percent)
  • Markets with the best return on flips in the third quarter included Baltimore (88 percent), Pittsburgh (79 percent), Detroit (61 percent), Richmond, Va. (60 percent) and Mobile, Ala. (59 percent)
  • Metros with the highest dollar amount of average gross profit on home flips included San Francisco, San Jose, Los Angeles, New York, Seattle and San Diego, all of which had an average gross profit of more than $125,000 per flip

5. Does House Flipping Have its Challenges Now? Yes… But Hasn’t it Always?

Blogger Mark Ferguson wrote in a recent article, “Investors have come back in a big way since the housing market recovered, and it is definitely harder to find deals. However, I have still been able to buy fix and flips and rental properties in a very competitive market. I have no secret ninja techniques to find deals; I simply used solid fundamentals to buy properties well below market value.”

Related: 7 Signs You’re Entering Into a House Flipping Disaster

Is the house flipping landscape changing as real estate markets change? Absolutely. But as any investor knows, house flipping has never been easy, and many of the same tenants still remain.

You should still educate yourself on the subject until you feel qualified to lead a Master’s course on it (there are over 500 blog articles on BiggerPockets regarding house flipping). You should still learn from someone more experienced than you. You should still run the numbers once, twice, 15 times… and never cheat on a deal’s projected profitability. You should still be wary of tight margins. And you should still expect house flipping to be hard work. As blogger Conor Flaherty says, “I don’t care how many HGTV shows make it look simple — I’m here to tell you that it’s not.”

So — is house flipping in the current market dead? It may not be the best option for all investors, but there are definitely still people out there making it work.

Will it be harder to profit than in the past? Most likely, it will — but when has “harder” ever stopped any BPer?

Now it’s your turn:

  • What do you think about the current real estate environment for house flipping? 
  • Would you flip a house in your local market?
  • Which “dead” band should make the next comeback tour? I personally vote for Rage Against the Machine, but I’m open to suggestions.

I’d love to discuss anything real estate news, house flipping (or whatever else) with you in the comments section!

A career writer, editor and blogger, Allison serves as the Director of Content for In the past, she has channeled her passion and curiosity for all things real estate into her jo...
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    Brandon Turner Investor from Maui, HI
    Replied almost 6 years ago
    Love it Allison! I think it’s so important to have articles like this because often times raw data is deceiving. The info from RealtyTrac is interesting, but definitely doesn’t mean things are over. I think the five points you brought up were spot on. I look forward to reading more of your commentary in the near future!
    Allison Leung from Denver, CO
    Replied almost 6 years ago
    Thanks, Brandon! What can I say — I’m learning from the best…
    Ben Leybovich Rental Property Investor from Chandler/Lima, Arizona/OH
    Replied almost 6 years ago
    What she means, Brandon, is that she is learning from me…:)
    Allison Leung from Denver, CO
    Replied almost 6 years ago
    Haha. Well played, Ben.
    Scott Trench President of BiggerPockets from Denver, CO
    Replied almost 6 years ago
    Allison – Thank you for the post! In my market (Denver) it seems like there are a ton of properties and neighborhoods with wildly high prices – and aging housing inventory. It seems like with high and rising prices, and relatively low rent to price ratios, flipping might be a better game in my market than buy-and-hold.
    Allison Leung from Denver, CO
    Replied almost 6 years ago
    Scott — Thanks for the comment and good point! While it might not be the best in the nation right now, if the numbers make sense and you can unload the property quickly (which in the Denver market doesn’t seem too hard), I would think flipping could work for many of the old homes in the area. We certainly have members, bloggers, and podcast interviewees in the area who have built businesses around flipping — and continue to do well with it.
    margaret smith
    Replied almost 6 years ago
    Hey Allison- This was a wonderful article to read- inspiring, yet realistic too- yes, those deals are harder to find than they were in 2009- but did you try to sell a house when prices were still declining 1-1.5% each month, like they were in Florida. THAT was scary! By the time you finished the rehab, the house was worth not much more than what you bought it for! One question- Does Realty Trac have a special bucket coded “FLIP”, and one for “PROFIT”? Where do they get those rarefied stats from exactly? I don’t see anyone in our area of SW Florida collecting those kinds of stats! When I sell a house at ARV, I don’t believe anyone is privvy to the profit I made on the sale…..tho’ from public record anyone can subtract the price I bought from the price I sold to come up with the difference– and you can be sure that that is not all profit!!! Really, I just don’t believe those stats.
    Allison Leung from Denver, CO
    Replied almost 6 years ago
    Hey there, Margaret: Thanks for reading and for the kind words! I think you bring up a great point regarding the data methodology. All that RealtyTrac tells us is: “RealtyTrac analyzed sales deed data and automated valuation data for this report. A single family home flip was any transaction that occurred in the third quarter where a previous sale on the same property had occurred within the last 12 months.” Further up in the article, it states: “Investors averaged a gross profit of $75,990 per flip on homes flipped in the third quarter of 2014, a 36 percent gross return on the initial investment — not including rehab costs and other expenses. ” In other words, I’m inclined to agree with you that these stats could be skewed, especially if they do not take into account rising rehab costs. The most useful information we can take from here is probably in mapping trends and comparing one statistic to another, rather than taking all of these numbers at face value. Still, like you, I’d love to hear more behind RealtyTrac’s methodology. Thanks again for your thoughtful comment!
    Frankie Woods Investor from Albuquerque, NM
    Replied almost 6 years ago
    Nice! Thanks for breaking out this stats and giving them real meaning! Analysts of the world unite!
    Allison Leung from Denver, CO
    Replied almost 6 years ago
    Thanks for your comment, Frankie! Woohoo, analysts & data! “Without data, you’re just another person with an opinion.” 🙂
    Daniel Ryu Investor from Irvine, CA
    Replied almost 6 years ago
    Love the stats! I’m looking to flip in the future, so I’m bookmarking this for later. Hope to read more articles from you in the future ^^
    Allison Leung from Denver, CO
    Replied almost 6 years ago
    Hi Daniel! Thanks so much for commenting, and be sure to look for some more articles from me soon!
    Benjamin Molnar from Weehawken, NJ
    Replied almost 6 years ago
    I’ve seen a lot of flips on the market in Phoenix but they are not great – looks like their owners watched a few flipping shows for tips but didn’t go the extra mile. Also, many of the houses are mid-range properties or in shabby neighborhoods. When I see these properties I don’t see value in the property; I immediate get the impression that someone trying to make a quick buck by inflating their margin based on cheap renovations. With lending restrictions remaining tight, I think the demographic that has the credit and the cash probably doesn’t want to pay a premium to move into an 80% property knowing that they have to make changes. Who wants earth tone paint and tile that in no way matches the white cabinets and white/blue marble counters in the kitchen? I’ve actually seen this…terrible. I believe you can still be very successful in a competitive market full of opportunistic flippers if you don’t cut corners and target the demographic that is looking for a ready to move-in property.
    Allison Leung from Denver, CO
    Replied almost 6 years ago
    Hello there, Benjamin: Thanks very much for your comment! I think you are right in pointing out that there are definitely flippers out there who might not have the experience necessary to know where you can save money and where you can’t afford to skimp. Like other real estate endeavors, flipping requires an intimate knowledge of the market and the demographics you should be marketing to. Thanks for lending us your perspective.
    Joshua Dorkin BiggerPockets Founder from Denver, CO
    Replied almost 6 years ago
    Nice one, Allison! Thanks for the research on this.
    Allison Leung from Denver, CO
    Replied almost 6 years ago
    Why thank you, Josh! I enjoyed writing it.
    Jay C. from Seattle, Washington
    Replied almost 6 years ago
    I love articles like this that rah rah sis boom bah against the facts. The article starts off with some facts and then goes on to poo poo them. Truth of the matter is the more folks who feel empowered off sites like BP and jump into the very tough pool of house flipper and get crushed just helps real investors as they pick up the pieces. So as your article says to “just do it” the pick up the pieces crowd which is what real flippers are is loving it. For the most part when folkis who dont know what they are doing try something new they fail. Not always but most times. Now what we have are alot of folks forcing the deal and getting burned in the process. Gung Ho sites that pump pushing it which I am finding all too often on BP is just adding fuel to future losses for many. I think if you are going to write an article like this then you need to break down to us the flips you have done in the last 90 days and give us your margin on it to support your data. If you cannot well I would refrain from pushing back against any data thats out there. I just dont find it responsible.
    Allison Leung from Denver, CO
    Replied almost 6 years ago
    Hi Jay: I actually largely do agree with many of the points you’re making, and I didn’t write this article to say, “Go flip houses, and you WILL profit!” I wrote it to say that I don’t think the current housing market spells the end of house flipping as a profitable endeavor for ALL real estate investors — and with that being said, you should absolutely still be incredibly cautious, run the numbers and only do deals that make sense for you financially and for your level of experience. I trust that the smart members and readers of this site can make those situation-specific decisions for themselves. I did set out to rebut some pieces I saw saying “house flipping is dead,” but I also wanted to temper enthusiasm with the realism that flipping is hard, requires experience, and may not work for everyone – but it does still work well as a business model for many investors, as shown by several of our (very successful) bloggers and members who regularly post their experiences here on BP. I hope that sentiment came across (at least somewhat) successfully. Thanks for reading & commenting!
    Robert Horton Professional from Camden, South Carolina
    Replied almost 6 years ago
    Allison, overall your article has some very good info. It always helps me to see what others are thinking about this market…..many times I second guess myself until I see factual info. I tend to agree with Margaret Smith and Jay C….I would like to know exactly how all of these national statistics (and some regional) actually tie in to the stats we see every day in our local markets. Maybe a survey of the BP members who have actually flipped 2 or more homes in the past year would help us to analyze all of this data better. Here’s what I see in my local market (Columbia, SC): 1) In 2013 we saw an influx of several institutional investors buying foreclosures for rentals. Most left the market at the beginning of 2014…..some are still here, but there were paying WAY above what your normal investor would pay. 2) In 2013 we also saw a sea of “weekend flippers” come into the market and pay higher prices and many times do shoddy work and not make the margins they saw on HGTV. (many of them have come and gone as well) 3) However, there seems to be a new group of these warriors who will come in and take over for the ones who failed keeping prices up because they tend to underestimate repairs and over pay for properties. 4) Here are some real numbers of foreclosure in my area taken directly from our local MLS. (I know there are some sold off the MLS but most go through the process of being listed and sold) (These are figures each year from Jan 1 – Nov 23 so we are comparing apples to apples) 2014 1,126 2009 1,152 2013 1,375 2008 831 2012 1,301 2007 347 2011 991 2006 458 2010 1,017 It looks like we are down this year about 18% in foreclosures YTD over 2013. I came across so many good deals last year I was able to wholesale 12 deals because I couldn’t afford to purchase them all. I have not seen that many deals this year and have wholesale fewer because of this. I am seeing more owner occupants purchase foreclosures and even more new flippers enter the market. 5) My margins and the margins I present wholesale deals to investors continues to tighten every year. We used to shoot for a $25K-$30K profit, then adjusted that to $20K-$25K and now are looking at many with a profit of $15K-$20K. (it always goes back to supply and demand…..there is too much demand for foreclosures at the current time) 6) I still think there are a lot of foreclosures left in this market. I periodically ride through “foreclosure neighborhoods” and see asset manager lockboxes and signs on properties still not listed. (many have been sitting there for several months like that) 7) I agree with your assessment of the potential for profit in renovating older homes. I recently watched a foreclosure start at a list price of $159K (way too high) and sell 10 months later for $70K. It was a total rehab on a tri-level in a well established neighborhood. The investor spent over $100K but listed it OVER the market for $265K and actually got a contract for $255K in 30 days. (not sure how it appraised) Now THAT is a good margin in our market! Why did it sell so quickly at that price?…..a young couple purchased it because of the location and the fact it looked like a brand new house. (I dropped the ball on that deal….it won’t happen again!) That’s just my 2 cents. I really enjoy BP and getting everyone’s perspective on their local markets. By the way, I hope Ace is doing well 🙂
    Allison Leung from Denver, CO
    Replied almost 6 years ago
    Hi Robert: Thanks for your very thoughtful reply to my article! I do agree with several of the points many in the comments section have made (and please see my replies to Margaret and Jay), and I love your idea of a BP flipper survey – I have some interview-type articles in the works, so stay tuned! As much as data can help inform and educate us on a market, I think it can be equally helpful to hear others’ firsthand experiences within various locales. Thank you for sharing the very interesting data on your SC market (I just moved from NC). It’s heartening to hear about the profit on that old home! Just from anecdotal experience, I have found it to be very true that those in my generation prefer the character (and sometimes location, depending on your city) of old homes with new home features and functionality. Ace is old rambunctious self, he says thanks for asking! 🙂
    Bill Elliott from Bedford, Texas
    Replied almost 6 years ago
    In the Dallas Ft. Worth, TX. market flipping property has, like many other areas, become more difficult. However, continuity in your efforts and consistency pay off. Your approach to the market also makes thing fire as they should. I use yellow letters, visit estate sales, go to the local family law court and review divorces that have real property in dispute, door to door marketing, drive for dollars and market, market, market. I am actually seeing a pick-up in my return. I am constantly seeking bird dogs and building relationships with them. I thank my family, friends and other investors when they tell me it can’t be done. I like challenges. They are the spice of my real estate investing life.
    Allison Leung from Denver, CO
    Replied almost 6 years ago
    Hi Bill: Thanks for adding your perspective and for letting us know what methods you’re using that work — I’m sure that’s incredibly helpful to other investors. I especially love this: “I thank my family, friends and other investors when they tell me it can’t be done. I like challenges.” Keep on keeping on!
    Replied almost 6 years ago
    Allison; Good article. In my area flipping is as strong as ever. As they say, location, location, location. Kev
    Allison Leung from Denver, CO
    Replied almost 6 years ago
    Thanks for weighing in, Kev! Absolutely agree re: location. Good to hear that flipping is alive and well in your location!
    Mario Mormile Investor/ Real Estate Agent from Burton, Ohio
    Replied about 5 years ago
    Allison- Great article! With the popularity and “cool factor” of house flipping, there will always be that demographic of people who think it is easy. They will either profit or, most likely, lose some cash sell there mistake to anther investor. My market is wonderful for flipping. Inventory is low. Although recently, new laws have passed regarding homes with septic and this has added a new dynamic when making the purchase. Thanks again!