Real Estate Broker · Member since 2025 · 196 posts · 79 votes
With materials and labor costs still fluctuating, I’ve seen some flippers shifting to smaller projects or leveraging short-term financing to manage multiple deals.
Curious — how are you keeping your margins healthy while the market keeps changing?
Investor · Jackson, MS · Member since 2021 · 657 posts · 559 votes
11mo
Markets are always changing - sometimes for the better and sometimes for the worse. The key to any flip we have done is to be clear going in what the numbers need to be and ensure we have a contingency amount factored in. If we are using a HML, assume the project will take 3 months longer than you thought it would and you can always be pleasantly surprised but not desperate to sell when the timeline bites you. Smaller projects or cosmetic flips are one way to control costs but full blown renos are still viable as long as you buy right and control what you put into it (do not over improve).
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
10mo
I would say the pricing reset that occurred a few years ago has to be taken into consideration along with increasingly demanding building code requirements that continue to go into effect across most of the country. I'm not seeing fluctuations now vs. a few months ago that are having material impacts. Material prices have continued to rise, particularly mechanical/plumbing supplies, but it's been gradual and no changes within reasonable rehab life cycles that are truly profitability altering. If you have been an active rehabber or builder, the past few years you should have accurate budgets. If you're new to real estate or have been sitting on the sideline for a while then I could see incorrect assumptions impacting projects.
I found some old draw schedules for 1200 SF rehabs I completed in Philadelphia in 2015. The project was permitted with all licensed and insured trades and the gut renovation cost $44,000. Today that same scope costs $100,000+ with a lengthier and more expensive permitting process. I believe that sums up the dilemma many in the rehab space are facing.
I've been doing some fairly substantial mix-use renovations and even there the numbers are tight due to material and building code demands. I have zoning approved 21unit project consisting of 12-unit conversion in existing school buildings and 9 new construction addition where I am contemplating a pivot 8 renovated units and a ground level and yard restaurant/beer garden concept if I can secure a liquor license. I can generate better revenue against cost building less. In other instances I am building larger luxury 3,000 homes I can sell for $400+SF vs. a denser site plan of 2,000 SF homes I can sell for $325/ft. Even after replacing dimensional lumber with engineered joists due to the wider spans required in the larger homes and using higher end finishes, the numbers are still significantly better.
Right now, more than any time in recent history, focusing on location and quality over quantity is where you can absorb costs better and generate better margins. Also, think out of the box and see how well-situated land or existing buildings can generate revenue without maxing out the buildable square footage/unit count. I wouldn't touch anything "affordable" or in lower tier neighborhoods/markets.