I'd like more specificity about the ROI on an average flip. Can you help?
Member since 2024 · 3 posts · 0 votes
I'd like more specificity about the ROI on an average flip. Can you help?
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
1yQuote from @Jimmy Wellman:
I've looked online for some information about the average % of the final home price vs. the price you purchase the home for and found that the home should be purchased for 70% of your home's final sale price. However, when I googled for the gross ROI, it said it was 27.5% in 2023 and I'm very curious about the net ROI. If the purchase price is 70% of the home's final sale price, what portion of the additional 30% is the $ spent on the flip and what portion is the average net gain?
I've heard 10%-20% is the average net gain but I just want to be more clear about it. Is that the percentage gained on the portion spent on flipping or the percentage of the price you bought the home for + the amount it costs to flip?
Can someone help me with an example where I buy a home for $70,000 then flip it until it's $100,000?
How much time on average will I personally spend on this 4-6 month process if I hire a team?
Thanks so much for your help!
-Jimmy
There is no average because there are few flips that are alike and what might take one guy or team 3 months might take you 3 years. It also depends on market conditions and availability of cash in the market, both of which will create more or less "meat" so to speak in the deal. When funding is plentiful and flips are rare, the competition will be heavy and experienced flippers with teams will take smaller returns just to keep their guys working, which means inexperienced 1-man crews will be shut out of the market. When funding is rare and flips are plentiful, there will be enough opportunities for everyone but return will be depressed and better operators will make better returns.
What kind of return you can accept depends wholly on you. Personally, I wouldn't do any flip for less than $30k net of sale because STCG tax for me would end up leaving me with about $20k or so of actual profit. Anything less than that is way too much work for what you're getting back, because flipping isn't investing it's a job. But if you don't have any kind of regular income, you might be happy making $20k or even less.
In general, you're going to make more money on solid middle class flips but you're going to need access to more capital to get it done. Most areas you're not going to turn a $100k purchase into $250k sales price unless it needs $100k in rehab. The market is just too tight for that any more.
Skyline Properties
5 Replies
- Real Estate Agent · Tooele, Salt Lake City UT · Member since 2020 · 136 posts · 54 votes1y
The 70% rule suggests buying a property for 70% of its ARV minus repair costs to ensure profit. For example, if a home's ARV is $100k and repairs cost $15k your target purchase price would be $55k.
In 2023, gross ROI for flips averaged 27.5%, but net ROI (after all costs) is usually 10-20%, calculated on the total investment (purchase price + repairs).
For a $70k home with $15k in repairs, selling at $100k might net $10k-$15k, or 12%-18%. If you hire a team, expect to spend 10-20 hours/month managing a 4-6 month flip.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes1y
Quote from @Jimmy Wellman:
I've looked online for some information about the average % of the final home price vs. the price you purchase the home for and found that the home should be purchased for 70% of your home's final sale price. However, when I googled for the gross ROI, it said it was 27.5% in 2023 and I'm very curious about the net ROI. If the purchase price is 70% of the home's final sale price, what portion of the additional 30% is the $ spent on the flip and what portion is the average net gain?
I've heard 10%-20% is the average net gain but I just want to be more clear about it. Is that the percentage gained on the portion spent on flipping or the percentage of the price you bought the home for + the amount it costs to flip?
Can someone help me with an example where I buy a home for $70,000 then flip it until it's $100,000?
How much time on average will I personally spend on this 4-6 month process if I hire a team?
Thanks so much for your help!
-Jimmy
There is no average because there are few flips that are alike and what might take one guy or team 3 months might take you 3 years. It also depends on market conditions and availability of cash in the market, both of which will create more or less "meat" so to speak in the deal. When funding is plentiful and flips are rare, the competition will be heavy and experienced flippers with teams will take smaller returns just to keep their guys working, which means inexperienced 1-man crews will be shut out of the market. When funding is rare and flips are plentiful, there will be enough opportunities for everyone but return will be depressed and better operators will make better returns.
What kind of return you can accept depends wholly on you. Personally, I wouldn't do any flip for less than $30k net of sale because STCG tax for me would end up leaving me with about $20k or so of actual profit. Anything less than that is way too much work for what you're getting back, because flipping isn't investing it's a job. But if you don't have any kind of regular income, you might be happy making $20k or even less.
In general, you're going to make more money on solid middle class flips but you're going to need access to more capital to get it done. Most areas you're not going to turn a $100k purchase into $250k sales price unless it needs $100k in rehab. The market is just too tight for that any more.
Skyline Properties - 1yKaden NguyenPro MemberReal Estate Agent · Cleveland OH | Orlando, FL · Member since 2022 · 19 posts · 21 votes
I think both Ryan & JD have already answered your questions.
In my opinion, if you’re new to this, find an experienced investor/flipper and partner with them. It would also help if you bring a solid deal to the table in exchange for the learning experience. All the best to your journey. - Member since 2024 · 3 posts · 0 votes1y
Quote from @Ryan Konen:
The 70% rule suggests buying a property for 70% of its ARV minus repair costs to ensure profit. For example, if a home's ARV is $100k and repairs cost $15k your target purchase price would be $55k.
In 2023, gross ROI for flips averaged 27.5%, but net ROI (after all costs) is usually 10-20%, calculated on the total investment (purchase price + repairs).
For a $70k home with $15k in repairs, selling at $100k might net $10k-$15k, or 12%-18%. If you hire a team, expect to spend 10-20 hours/month managing a 4-6 month flip.
- Member since 2024 · 3 posts · 0 votes1y
Thanks Ryan/JD/Kaden! This was so helpful.
I'm assuming the net ROI excludes capital gains?
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