{"id":183500,"date":"2025-06-25T13:04:29","date_gmt":"2025-06-25T19:04:29","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=183500"},"modified":"2025-06-25T13:04:32","modified_gmt":"2025-06-25T19:04:32","slug":"flipper-margins-get-squeezed-in-q1-2025","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/flipper-margins-get-squeezed-in-q1-2025","title":{"rendered":"Home Flipping Margins Tighten as Deals Become More Scarce"},"content":{"rendered":"\n<p><span data-preserver-spaces=\"true\">There\u2019s some good news and some bad news regarding <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/guides\/how-to-flip-houses\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">home flipping<\/span><\/a><span data-preserver-spaces=\"true\">.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The good news is that despite high interest rates, it\u2019s still possible to turn a profit and make a decent living flipping houses. The bad news is that profits are tighter, and deals are hard to find. You need to flip more houses than before to make the same money as when rates were lower, and sales prices were on the rise. <\/span><span data-preserver-spaces=\"true\">This<\/span><span data-preserver-spaces=\"true\"> is according to real estate data and analytics site<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.attomdata.com\/news\/market-trends\/flipping\/q1-2025-home-flipping-report\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\"> ATTOM\u2019s First Quarter 2025 U.S. Home Flipping Report<\/span><\/a><span data-preserver-spaces=\"true\">.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Flips accounted for 8.3% of all home sales from January through to March this year, which amounts to 67,394 single-family homes and condominiums. It marked a slight increase from the previous quarter\u2019s 7.4% but a drop from the same time last year when flips were 8.7% of all noncommercial residential housing sales.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Profit Margins Shrink<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">The biggest impediment to house flippers is high-priced homes that leave little room for profit, as it still means buying high and selling higher in a market that has slammed on the brakes compared to the runaway <\/span><span data-preserver-spaces=\"true\">train that it was in<\/span><span data-preserver-spaces=\"true\"> 2020.<\/span><span data-preserver-spaces=\"true\"> According to ATTOM, the typical investor paid $260,000 for a home they flipped in the first quarter of 2025, selling it for $325,000, netting between $65,000 and $70,000, after holding and closing costs.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">ATTOM CEO Rob Barber said:<\/span><\/p>\n\n\n\n<p><em><span data-preserver-spaces=\"true\">\u201cThe competitive home market means high prices, which is good for short-term investors on the selling end. <\/span><span data-preserver-spaces=\"true\">But that<\/span><span data-preserver-spaces=\"true\"> dynamic is also making it harder to find underpriced homes to buy <\/span><span data-preserver-spaces=\"true\">up<\/span><span data-preserver-spaces=\"true\">, and it\u2019s ultimately squeezing profit margins for the industry.<\/span> <span data-preserver-spaces=\"true\">It\u2019s tricky<\/span><span data-preserver-spaces=\"true\"> to balance at times when the market <\/span><span data-preserver-spaces=\"true\">looks like it could take<\/span><span data-preserver-spaces=\"true\"> a downturn.<\/span><span data-preserver-spaces=\"true\"> Investors don\u2019t want to buy a property when prices are high and then see them drop before they\u2019re ready to sell.\u201d<\/span><\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Two-Thirds<\/span><span data-preserver-spaces=\"true\"> of Major Markets Register a Flipping Downturn<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">ATTOM analyzed data from metro areas with over 200,000 residents and a minimum of 50 home flips in Q1 2025. Specific trends emerged, with Southern cities, particularly those in Georgia and the Midwest, indicating that flipping is still viable, albeit on a much smaller scale than before.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The most robust flipping markets were, with the highest percentages of flips:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong><span data-preserver-spaces=\"true\">Macon, GA:<\/span><\/strong><span data-preserver-spaces=\"true\"> 21% of all home sales\u00a0<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Warner-Robins, GA:<\/span><\/strong><span data-preserver-spaces=\"true\"> 20.6%<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Atlanta: <\/span><\/strong><span data-preserver-spaces=\"true\">15.9%<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Memphis:<\/span><\/strong><span data-preserver-spaces=\"true\"> 14.7%<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Akron, OH:<\/span><\/strong><span data-preserver-spaces=\"true\"> 13.3%<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">Other than Atlanta and Memphis, metros with over 1 million residents with the highest number of flips were:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong><span data-preserver-spaces=\"true\">Birmingham, AL:<\/span><\/strong><span data-preserver-spaces=\"true\"> 12.8%<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Kansas City, MO:<\/span><\/strong><span data-preserver-spaces=\"true\"> 11.6%<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Salt Lake City:<\/span><\/strong><span data-preserver-spaces=\"true\"> 11.1%<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">There have also been some dramatic downturns in flipping from previously prolific markets. The <\/span><span data-preserver-spaces=\"true\">smallest<\/span><span data-preserver-spaces=\"true\"> proportion of flips in the largest metros were:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong><span data-preserver-spaces=\"true\">Honolulu:<\/span><\/strong><span data-preserver-spaces=\"true\"> 4.7%<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">New Orleans:<\/span><\/strong><span data-preserver-spaces=\"true\"> 4.9%<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Seattle:<\/span><\/strong><span data-preserver-spaces=\"true\"> 5.5%<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Pittsburgh: <\/span><\/strong><span data-preserver-spaces=\"true\">5.9%<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Portland, OR:<\/span><\/strong><span data-preserver-spaces=\"true\"> 6.1%<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">Several Southern cities experienced sharp declines in flipping profit margins from quarter to <\/span><span data-preserver-spaces=\"true\">quarter<\/span><span data-preserver-spaces=\"true\">.<\/span><span data-preserver-spaces=\"true\"> These were:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong><span data-preserver-spaces=\"true\">Spartanburg, SC<\/span><\/strong><span data-preserver-spaces=\"true\"> (ROI down from 160.2% in Q4 2024 to 31.3% in Q1 2025)<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Ocala, FL<\/span><\/strong><span data-preserver-spaces=\"true\"> (down from 125% to 50.6%)<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Lynchburg, VA<\/span><\/strong><span data-preserver-spaces=\"true\"> (down from 69.2% to 31%)\u00a0<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Johnson City, TN<\/span><\/strong><span data-preserver-spaces=\"true\"> (down from 82.1 to 44.5%)<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">In major cities with populations over 1 million, profits were down across the country, from 51.3% to 37.8% in Fresno and 44.2% to 36.1% in New York, with cities in between, such as Pittsburgh, Chicago, and St. Louis also experiencing declines. In only 26% of the 173 areas analyzed, cities experienced profit margins over 50%.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">However, and this is where things become interesting, some cities, such as Pittsburgh, experienced a decline in flipping activity but still ranked among the top cities for ROI on the houses that <\/span><span data-preserver-spaces=\"true\">were flipped<\/span><span data-preserver-spaces=\"true\">. That\u2019s because houses in the Steel City are generally more affordable than those in the rest of the country, resulting in a 2% lower <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/pittsburghregion.org\/living-in-pittsburgh\/pittsburgh-cost-of-living\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">cost of living<\/span><\/a><span data-preserver-spaces=\"true\"> compared to the national average. However, the volume of available inventory is low, which is why the volume of flips has dropped.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Elsewhere, other Southern and Northern cities with populations exceeding 1 million, such as Buffalo, New Orleans, Memphis, and Philadelphia, also demonstrated the <\/span><span data-preserver-spaces=\"true\">greatest<\/span><span data-preserver-spaces=\"true\"> profit margins, <\/span><span data-preserver-spaces=\"true\">largely<\/span><span data-preserver-spaces=\"true\"> due to their burgeoning economies.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Conversely, don\u2019t expect to make big bucks if you\u2019re flipping houses in these Texas cities:&nbsp;<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong><span data-preserver-spaces=\"true\">Austin<\/span><\/strong><span data-preserver-spaces=\"true\"> (1% ROI)<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Dallas <\/span><\/strong><span data-preserver-spaces=\"true\">(3.7% ROI)<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Houston <\/span><\/strong><span data-preserver-spaces=\"true\">(5% ROI)<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">San Antonio<\/span><\/strong><span data-preserver-spaces=\"true\"> (6.9% ROI)<\/span><\/li>\n<\/ul>\n\n\n\n<p><span data-preserver-spaces=\"true\">They all experienced explosive growth after the pandemic <\/span><span data-preserver-spaces=\"true\">and<\/span><span data-preserver-spaces=\"true\"> have since seen sales prices stall or <\/span><span data-preserver-spaces=\"true\">fall<\/span><span data-preserver-spaces=\"true\">.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">The Lower the Cost, the Higher the Profit<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">If you don\u2019t have a high-risk tolerance, the resounding message from ATTOM\u2019s ROI data is to stay away from higher-end flips. Metro areas where investors could buy homes for less than $225,000 gave the best returns, offering a median profit of 46.4%. When the cost of a flip was between $225,000 and $400,000, the profit margin dropped to 22%<\/span><span data-preserver-spaces=\"true\">, and above<\/span><span data-preserver-spaces=\"true\"> $400,000, it <\/span><span data-preserver-spaces=\"true\">dropped<\/span><span data-preserver-spaces=\"true\"> again to 19%.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">What the ATTOM data didn\u2019t show was that more expensive houses, often due to their size or the higher-end finishes required, also had a greater likelihood of going over budget and diminishing returns <\/span><span data-preserver-spaces=\"true\">even more<\/span><span data-preserver-spaces=\"true\">.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Cash Is Still King<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Leveraging a flip with <\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/real-estate-companies\/hard-money-lenders\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">hard money<\/span><\/a><span data-preserver-spaces=\"true\"> in an era of high interest rates is always a risky proposition when buyers are sitting on the fence. You may be required to refinance into a conventional mortgage. <\/span><span data-preserver-spaces=\"true\">It\u2019s one<\/span><span data-preserver-spaces=\"true\"> of the reasons that 62.2% of all homes flipped during the first quarter <\/span><span data-preserver-spaces=\"true\">were purchased<\/span><span data-preserver-spaces=\"true\"> with cash.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">It probably comes as no surprise that less-expensive<\/span><span data-preserver-spaces=\"true\"> markets were where the highest percentages of all-cash purchases took place.<\/span><span data-preserver-spaces=\"true\"> These include:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong><span data-preserver-spaces=\"true\">Rockford, IL<\/span><\/strong><span data-preserver-spaces=\"true\"> (81.6%)<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Toledo, OH<\/span><\/strong><span data-preserver-spaces=\"true\"> (81.2%)<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Buffalo, NY<\/span><\/strong><span data-preserver-spaces=\"true\"> (81.2%)<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Cape Coral, FL<\/span><\/strong><span data-preserver-spaces=\"true\"> (81.1%)<\/span><\/li>\n\n\n\n<li><strong><span data-preserver-spaces=\"true\">Naples, FL<\/span><\/strong><span data-preserver-spaces=\"true\"> (81.1%)<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Final Thoughts<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Only the most resilient, experienced, and well-funded are flipping houses these days. If you\u2019re not any of those things, it\u2019s best to stay on the sidelines. <\/span><span data-preserver-spaces=\"true\">Expensive markets <\/span><span data-preserver-spaces=\"true\">are<\/span><span data-preserver-spaces=\"true\"> a significant risk unless you have the resources to hold <\/span><span data-preserver-spaces=\"true\">on to<\/span><span data-preserver-spaces=\"true\"> a home in case it doesn\u2019t sell at the price you need it to.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">House flipping <\/span><span data-preserver-spaces=\"true\">is governed<\/span><span data-preserver-spaces=\"true\"> by inventory and interest rates. <\/span><span data-preserver-spaces=\"true\">Although inventory is increasing, it <\/span><span data-preserver-spaces=\"true\">still<\/span><span data-preserver-spaces=\"true\"> remains below the recommended six-month supply for a healthy market, indicating demand for houses.<\/span><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">However, prices have not fallen enough yet to entice buyers to make offers while interest rates are high. That doesn\u2019t mean flipping is not possible today, but it does demand a lot of sifting through homes in less-expensive markets to find one that makes sense.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Such is the reticence, however, of flippers to take a risk that if you have deep pockets, you <\/span><span data-preserver-spaces=\"true\">might<\/span><span data-preserver-spaces=\"true\"> stand a better chance of negotiating a low price.<\/span><span data-preserver-spaces=\"true\"> If your offer is accepted, ensure you have sufficient liquidity to hold on to it <\/span><span data-preserver-spaces=\"true\">in the event that<\/span><span data-preserver-spaces=\"true\"> it doesn\u2019t sell.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Eventually, the market will turn around. It\u2019s just a question of when.<\/span><\/p>\n\n\n","protected":false},"excerpt":{"rendered":"<p>There\u2019s some good news and some bad news regarding home flipping. The good news is that despite high interest rates, it\u2019s still possible to turn a profit and make a [&hellip;]<\/p>\n","protected":false},"author":613725,"featured_media":183503,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8],"tags":[],"class_list":["post-183500","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-trends"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/183500","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613725"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=183500"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/183500\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/183503"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=183500"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=183500"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=183500"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}