Flipping Profits Tumbled To 7 Year Low

16 Replies

Some markets are good, some not so good. This is current data and it just is what it is:

Among the 53 metro areas analyzed in the report with at least 1 million people, those with the highest share of completed flips sold to all-cash buyers - often other real estate investors -

in 2018 were Detroit, Michigan (48.8 percent); Birmingham, Alabama (42.4 percent); Jacksonville, Florida (39.8 percent); Miami, Florida (38.3 percent); and Buffalo, New York (38.0 percent).

Completed home flips in 2018 yielded an average gross profit of $65,000 (difference between median purchase price and median flipped sale price), down 3 percent from an average gross flipping profit of $66,900 in 2017.

(Gross Profit of $65,000 per flip sounds enticing - But, and it's a BIG BUTT, Here is what they don't tell you: The average NET Profit is $15,000 (according to NAR). That means out of the $65,000 you have to subtract renovation costs, holding costs, taxes, insurance, realtor fees & closing costs etc. and of course short term capital gains to get your Net profit that goes into your pocket.)

The 47,071 home flips in Q4 2018 were completed by 37,379 investors, a ratio of 1.26 flips per investor.

Homes flips completed in Q4 2018 took an average of 175 days, down from 177 days in the previous quarter and down from 178 days in Q4 2017.

So, the average flipper gets a flip completed in 6 months, and makes $15,000. Warms your heart doesn't it? All that work and risk and you get two done a year and make $130,000 take home $30,000.

If you want to get wealthy, you don't do flips. You do "cash flow'.

Or invest in main road frontage not in rentals defined to subdivison, anti main drag minimums that never have the opportunity for other property pursuits

Account Closed

Nice data. Thanks for sharing.

If some one does 1 flip / year outside of other sources as secondary revenue stream / side gig, then it is OK.

$30,000/year is less than average househould income in USA. 

Originally posted by @Saravanan Saravanan :

@Mike M.

Nice data. Thanks for sharing.

If some one does 1 flip / year outside of other sources as secondary revenue stream / side gig, then it is OK.

$30,000/year is less than average househould income in USA. 

1 Flip a year averages $15,000. It takes 2 flips to average $30,000

 Sure, it is better. However, if you do one "cash flow" if is even better without the risk and a lot less work and no taxes. You can do two or three "cash flow" with much better results.

In investing you should look at "Good", "Better" and "Best" use of you time and resources. 

Flips is "Good", "cash flow" is "Better"

Average Cash Flow Per Door In Phoenix Metro Area

https://www.biggerpockets.com/forums/600/topics/584916-average-cash-flow-per-door-in-phoenix-metro-area

Originally posted by @Carolyn Morales :

Or invest in main road frontage not in rentals defined to subdivison, anti main drag minimums that never have the opportunity for other property pursuits

 Please explain.

Account Closed  Keep in mind the top markets you mentioned are all TOP turn key markets were investors are buying rentals 

10 to 15k profit for a turn key company is what they do the difference is the turn key companies might sell 5 to 10 a month.. 

But your right I was talking to a flipper in LA at a conference and they do 600 to800k houses and were averaging about 15k per flip.. but they did 80 of them.. so while they made over a million for the year thats a ton of work and debt to manage.

If your going to be successful flipping you have to be able to do volume as you clearly denote.. one at a time unless your hitting big numbers.. Is not going to cut it.. unless its a side hustle basically and one flip even if its just 15k a year is worth a number of drip rentals based on 200 a month cash flow  or in non appreciating markets.  Its all about scale just like you scale your business you cant just do one or 2 sub toos a year and get anywhere. or it will take you 30 years. 

And in todays world we see people want to get rich in real estate basically over night.. :)  

But this is what the flipping Gurus teach and many have gotten in trouble promising 40k a month and you to can do that.

realization is the average person unless they have access to a few million in cash and loans will never get to those volumes..

@Mike M

A house in a subdivision will always be a house in a subdivision with a maxed potential, unless you can airbnb manage it. A house or a mobile home on a main road, not held completely to the sfr zoning as development moves into an area main road frontage can be turned to commercial all the while you are renting it as an sfr until that potential shows up.

For example, we bought as a tax deed 2.56 acres on Normandy blvd in Jacksonville Florida with 2 houses and a Mobile home for 49k, but it also has 528 ft of frontage on Normandy blvd which is SR 228 & 330 ft on the side rd. A new highway was built 2 new roads close by, there is much brand new industry and approval for 1139 new apartment units across the street.

The 2 houses need rehabbed or torn down, the mh has an inherited occupant,.paying rent. We bought it with partners who dont want to rehab a thing., anyway , 528.ft of frontage is very appealing to commercial industry. We wont quiet title but just hold it til those apartments are through building. In 32221 We have GE OIL and Gas, Saft International , a Solar Company, Wayfair is building, Bridgestone tires, A college, FSCJ Cecil Campus, The Equesteian Center is also a concert entertainment venue, Cecil Commerce, all fairly recent and more is coming to 32221, Amazon is in 32210 just over the border of 32221 and the 32210 housing is older and saturated all the new construction is coming to 32221.

We will rezone to commercial or sell to a company that will do it , 528 ft frontage on SR 228 & 330 ft on Nathan Hale rd.

Originally posted by @Carolyn Morales :

@Mike M

A house in a subdivision will always be a house in a subdivision with a maxed potential, unless you can airbnb manage it. A house or a mobile home on a main road, not held completely to the sfr zoning as development moves into an area main road frontage can be turned to commercial all the while you are renting it as an sfr until that potential shows up.

For example, we bought as a tax deed 2.56 acres on Normandy blvd in Jacksonville Florida with 2 houses and a Mobile home for 49k, but it also has 528 ft of frontage on Normandy blvd  which is SR 228 & 330 ft on the side rd. A new highway was built 2 new roads close by, there is much brand new industry and approval for 1139 new apartment units across the street.

The 2 houses need rehabbed or torn down, the mh has an inherited occupant,.paying rent. We bought it with partners who dont want to rehab a thing., anyway , 528.ft of frontage is very appealing to commercial industry.  We wont quiet title but just hold it til those apartments are through building. In 32221 We have GE OIL and Gas, Saft International , a Solar Company, Wayfair is building, Bridgestone tires, A college, FSCJ Cecil Campus, The Equesteian Center is also a concert entertainment venue, Cecil Commerce, all fairly recent and more is coming to 32221, Amazon is in 32210 just over the border of 32221 and the 32210 housing is older and saturated all the new construction is coming to 32221.

We will rezone to commercial or sell to a company that will do it , 528 ft frontage on SR 228 & 330 ft on Nathan Hale rd.

 Sounds like you made a wise purchase.

Originally posted by @Carolyn Morales :

@Mike M

A house in a subdivision will always be a house in a subdivision with a maxed potential, unless you can airbnb manage it. A house or a mobile home on a main road, not held completely to the sfr zoning as development moves into an area main road frontage can be turned to commercial all the while you are renting it as an sfr until that potential shows up.

For example, we bought as a tax deed 2.56 acres on Normandy blvd in Jacksonville Florida with 2 houses and a Mobile home for 49k, but it also has 528 ft of frontage on Normandy blvd  which is SR 228 & 330 ft on the side rd. A new highway was built 2 new roads close by, there is much brand new industry and approval for 1139 new apartment units across the street.

The 2 houses need rehabbed or torn down, the mh has an inherited occupant,.paying rent. We bought it with partners who dont want to rehab a thing., anyway , 528.ft of frontage is very appealing to commercial industry.  We wont quiet title but just hold it til those apartments are through building. In 32221 We have GE OIL and Gas, Saft International , a Solar Company, Wayfair is building, Bridgestone tires, A college, FSCJ Cecil Campus, The Equesteian Center is also a concert entertainment venue, Cecil Commerce, all fairly recent and more is coming to 32221, Amazon is in 32210 just over the border of 32221 and the 32210 housing is older and saturated all the new construction is coming to 32221.

We will rezone to commercial or sell to a company that will do it , 528 ft frontage on SR 228 & 330 ft on Nathan Hale rd.

 land in path of progress  Up zoning.. mining for hidden lots.. all make very good money for those willing to put the effort in. 

One of my big money makers is just knowing local zoning code and were to find hidden lots.. 

For instance I am in process right now in Portlandia tough competitive market.. bought house right off of MLS system for 400k during the escrow period we were able to confirm 2 new lots 25X 100 each on each side of the existing home.. had to knock down a fence.. but by the time I closed i had the house which need about 5 to 7k in fluff and buff and 2 lots. I resold the house for 390k of course we are our own agents so will net about 375k out of it now i am in two lots that have market value of 100 to 120k EACH for roughly 25k total.. all done during the escrow for maybe 2k out of pocket. its simply does not get any better than this.. if you know how to do it.. I have been doing this in INDY and Charleston and you can do it in virtually any city in the US.. thats were the real quick flip money is made.. now on these we are building new construction so on top of the equity we made on the lots we will make about 50k per new build .. so 250k profit or so on a 50k investment in less than 9 months or i could go buy a rental and make 300 a month if I am lucky LOL. because thats were the real money is made.

See how we can twist these to make our particular models sell or seem like the greatest thing since sliced toast  LOL.

These are the hidden gems that take a little more know how than just HEY buy this house my mortgage is 1k my rent is 1500 i make 200 a month .. thats very basic real estate and if you can scale it and thats what you want fine.. but there are plenty of other methods to get you serious wealth much quicker..

@Jay Hinrichs, I love Dirt!  I have made the easiest money with dirt and turned primary residences to rental properties, never bought a flip on purpose or a rental on purpose. My favorite is dirt! I do the research though instead of watching tv.

Can you build on 25 ft wide lots there? 

I bought a landlocked  one that was a td 2 x before for $750.00 because I discovered the front and side owner had 400k commercial lots., He paid me 15k for it, that more than doubled his front piece. I paid $7600.00 for a vacant lot east of us 17 in 32210. Sold it for 65k, no tenants toilets or rehab. I really love dirt! I bought and sold my 1st land in 1989, I didnt learn tax deeds til 2/2017. 

Originally posted by @Carolyn Morales :

@Jay Hinrichs, I love Dirt!  I have made the easiest money with dirt and turned primary residences to rental properties, never bought a flip on purpose or a rental on purpose. My favorite is dirt! I do the research though instead of watching tv.

Can you build on 25 ft wide lots there? 

I bought a landlocked  one that was a td 2 x before for $750.00 because I discovered the front and side owner had 400k commercial lots., He paid me 15k for it, that more than doubled his front piece. I paid $7600.00 for a vacant lot east of us 17 in 32210. Sold it for 65k, no tenants toilets or rehab. I really love dirt! I bought and sold my 1st land in 1989, I didnt learn tax deeds til 2/2017. 

In charleston i built on a 15 foot wide lot and sold the house for 550k.  and in Tokyo they build on 10X10.. :)

keep in mind that the same survey company laid out San Francisico and Portland in the late 1800s all the lots were 25/100 

you drive through SF you will see that clearly.. same goes for almost any older city. 

Originally posted by Account Closed:

Some markets are good, some not so good. This is current data and it just is what it is:

Among the 53 metro areas analyzed in the report with at least 1 million people, those with the highest share of completed flips sold to all-cash buyers - often other real estate investors - 

in 2018 were Detroit, Michigan (48.8 percent); Birmingham, Alabama (42.4 percent); Jacksonville, Florida (39.8 percent); Miami, Florida (38.3 percent); and Buffalo, New York (38.0 percent).

Completed home flips in 2018 yielded an average gross profit of $65,000 (difference between median purchase price and median flipped sale price), down 3 percent from an average gross flipping profit of $66,900 in 2017.

(Gross Profit of $65,000 per flip sounds enticing - But, and it's a BIG BUTT, Here is what they don't tell you: The average NET Profit is $15,000 (according to NAR). That means out of the $65,000 you have to subtract renovation costs, holding costs, taxes, insurance, realtor fees & closing costs etc. and of course short term capital gains to get your Net profit that goes into your pocket.)

The 47,071 home flips in Q4 2018 were completed by 37,379 investors, a ratio of 1.26 flips per investor.

Homes flips completed in Q4 2018 took an average of 175 days, down from 177 days in the previous quarter and down from 178 days in Q4 2017.

So, the average flipper gets a flip completed in 6 months, and makes $15,000. Warms your heart doesn't it? All that work and risk and you get two done a year and make $130,000 take home $30,000.

If you want to get wealthy, you don't do flips. You do "cash flow'.

 Or you can just be above average.

Originally posted by @Brad Braun :
Originally posted by @Mike M.:

Some markets are good, some not so good. This is current data and it just is what it is:

Among the 53 metro areas analyzed in the report with at least 1 million people, those with the highest share of completed flips sold to all-cash buyers - often other real estate investors - 

in 2018 were Detroit, Michigan (48.8 percent); Birmingham, Alabama (42.4 percent); Jacksonville, Florida (39.8 percent); Miami, Florida (38.3 percent); and Buffalo, New York (38.0 percent).

Completed home flips in 2018 yielded an average gross profit of $65,000 (difference between median purchase price and median flipped sale price), down 3 percent from an average gross flipping profit of $66,900 in 2017.

(Gross Profit of $65,000 per flip sounds enticing - But, and it's a BIG BUTT, Here is what they don't tell you: The average NET Profit is $15,000 (according to NAR). That means out of the $65,000 you have to subtract renovation costs, holding costs, taxes, insurance, realtor fees & closing costs etc. and of course short term capital gains to get your Net profit that goes into your pocket.)

The 47,071 home flips in Q4 2018 were completed by 37,379 investors, a ratio of 1.26 flips per investor.

Homes flips completed in Q4 2018 took an average of 175 days, down from 177 days in the previous quarter and down from 178 days in Q4 2017.

So, the average flipper gets a flip completed in 6 months, and makes $15,000. Warms your heart doesn't it? All that work and risk and you get two done a year and make $130,000 take home $30,000.

If you want to get wealthy, you don't do flips. You do "cash flow'.

 Or you can just be above average.

Yup on the remodels i have done in Charleston i have made no less than 50k per project and the new construction averages about 100k profit per house and up.. so yes i know some only make 15k but .. to compare that to just putting cash out to create 200 a month in delta.. only way this stuff works if you can find deals with a ton of equity.. to just buy sub too and have very little equity to me is a fools errand unless its in known areas for decent appreciation.

I'm currently working with a group I met here on BP and our their 1st deal was listed on MLS, the ARV comps were in the 550-650 range, there are active listings that could be comps on up to 700k, so using a listing price of 635k, we bought this home for 330k, plus 120k for a complete rehab. Expecting at least 100k+ in profit. Not bad for their 1st deal. The amount of research, offers, pounding pavements, etc that went into finding this deal was what it took to make it happen. There are deals to be found. If you're settling for average deals, so be it, if that's your business model, but if you put in the time, work hard, and don't settle for average, you can start to earn more per home average. I rarely see 15k profits on rehabs, that number is too low for us to even consider making an offer on.

Originally posted by Account Closed:

(Gross Profit of $65,000 per flip sounds enticing - But, and it's a BIG BUTT, Here is what they don't tell you: The average NET Profit is $15,000 (according to NAR). That means out of the $65,000 you have to subtract renovation costs, holding costs, taxes, insurance, realtor fees & closing costs etc. and of course short term capital gains to get your Net profit that goes into your pocket.)

If you want to get wealthy, you don't do flips. You do "cash flow'.

Yah, that is terribly misleading. $65k --> $15k is very significant. And you do have to "keep churning" to make money in fix and flips. 
I don't know, I'm still interested in lending on fix and flips here in Charleston and am thinking of doing one myself. I think a) fix and flips are amazing and b) you don't have to be a landlord. The worst aspect I think is that the profit is short term capital gains, and the risk of a market correction while you're doing your thing.

Cash flow is king, you are right. Unfortunately, either way it involves a) trusting a third party, like a syndicator; b) landlording; or c) dealing with a property manager.

Originally posted by @Brad Braun :

I'm currently working with a group I met here on BP and our their 1st deal was listed on MLS, the ARV comps were in the 550-650 range, there are active listings that could be comps on up to 700k, so using a listing price of 635k, we bought this home for 330k, plus 120k for a complete rehab. Expecting at least 100k+ in profit. Not bad for their 1st deal. The amount of research, offers, pounding pavements, etc that went into finding this deal was what it took to make it happen. There are deals to be found. If you're settling for average deals, so be it, if that's your business model, but if you put in the time, work hard, and don't settle for average, you can start to earn more per home average. I rarely see 15k profits on rehabs, that number is too low for us to even consider making an offer on.

On a "projected" sale of $650,000 don't you also have realtor fees of about $32,500 (5%) plus closing costs plus short term capital gains plus holding costs? Your $100,000 profit drops significantly.

I agree, there are some nice profits to be made if you find the "right" property but you can't always find the "right" property. Apparently most flippers aren't finding the right properties nationally.

It's the old adage, "we're losing money on every project but we'll make it up in volume".