Hi @Jimmy Vasquez,
Also, Lon Welsh from YCRE shared this article today and I thought you would appreciate the content. I personally am in the market for more of the long haul on investment properties- flip and hold but it is still a great read for investors.
Home flippers are seeing the lowest return on investment in nearly a decade — but that still makes for tens of
thousands of dollars in returns, according to new data from national property database Attom Data solutions LLC.
The gross profit on a typical home flip — the different between the median sale price and the median price paid by
the investors — rose to $67,000 in the second quarter of 2021, up 2.4% from the $65,400 in the first quarter of
2021 and up 3.1% over the $65,000 seen in the second quarter of 2020, according to Attom
But that heightened gross profit translated into a 33.5% return on investment compared to the original acquisition
price, down from 37.2% in the first quarter of 2021 and down from 40.6% during the second quarter of 2020.
That puts it at a level last seen since in first quarter of 2011, when the housing market had yet to fully recover from
the slump brought on by the Great Recession.
“Home flipping rebounded during the second quarter. But profits sure didn’t, as the typical home flip around the
country netted the smallest return on investment in a decade,” said Todd Teta, chief product officer at Attom.
“However, it’s not like home flipping has become a losing proposition. A 33% profit on a short-term investment
remained pretty decent, even after renovation and holding expenses. But with a few more periods like the second
quarter of this year, investors may need to reframe how they look at these deals.”
The drop in ROI comes from soaring home prices on both ends of the flip deal. The median price of homes flipped
in the second quarter of 2021 soared to an all-time high of $267,000, up 10.6% from the $241,400 in the first
quarter of 2021 and up 18.7% from the $225,000 seen a year later. But those price increases were not enough to
absorb the higher costs flippers had to pay to buy those homes in the first place, according to Attom.
Overall, the number of flips rose in the second quarter of 2021, with 79,733 single-family homes and
condominiums sold, or about 4.9% of all home sales – the first time the proportion of flips has increased in a year.
It is up from 3.5% of all sales seen in the first quarter of 2021, but down from 6.8% seen during the second quarter
of 2020 and below the levels seen over the last decade.
The metro areas with the highest share of flips as a total of sales included Savannah, Georgia, with flips accounting
for 9.5% of all home sales, and Fort Wayne, Indiana, with flips accounting for 9.3% of all home sales. Canton,
Ohio, flips totaled 9% of all home sales, according to Attom. But the metro areas with the biggest returns on
investment were Oklahoma City, with an ROI of 196.4%, Fargo, North Dakota, with an ROI of 185.7% and
Pittsburgh, with an ROI of 154.2%.
Meanwhile Gulfport, Mississippi, saw a 7.8% loss, while Corpus Christi, Texas saw just a 0.7% return, the lowest
among metro areas in Attom’s data.
The fresh report comes as the Covid-19-fueled housing market — with homes selling well above asking price —
may have reached its peak — at least according to recent data.
That doesn't mean housing prices are going to come down in the near future, and in many parts of the country the
housing market continues to remain red hot, but some national indicators are showing early signs of balancing,
according to Redfin Economist Taylor Marr.
There are other signs the market might be turning, with new home listings surpassing prepandemic levels earlier
in July, according to reporting by Ashley Fahey, real estate editor at The Business Journals.