Are Investors Still Flipping?

Question

I feel like I've noticed a decline in investors looking for flips in the middle Tennessee area recently. Some just seem too hesitant to buy anything at the moment. I'm constantly getting single family homes under contract but I'm having a hard time finding serious buyers. My deals make sense and have large enough margins, that's not the issue. I can deliver exactly what the buyer is asking for but when it comes time to actually purchase, they get cold feet. And when I try to find new buyers, no one seems to be looking for off market property in this area right now. Is it the market currently holding people back? Or have investors just found other strategies that are working better than flipping right now?

Travis Main · Answer

Hey Hailey,

Middle Tennessee, especially around Nashville and the surrounding counties, experienced massive appreciation from roughly 2020 through 2023. During that period, flippers could often buy a property with thinner margins because the market was moving up while they were rehabbing it. Today, appreciation has slowed considerably, so investors can't rely on the market to bail them out if they're wrong on their numbers.

At the same time, costs have gone up across the board. Labor is more expensive, insurance costs have increased, property taxes are higher, and holding costs are significantly higher because of interest rates. A flip that looked like a $50,000 profit a few years ago may now only produce $20,000-$30,000 after everything is accounted for, and many investors don't think that's enough reward for the risk.

Another factor is buyer affordability. End buyers are much more payment-sensitive than they were a few years ago. Even if home prices haven't dropped dramatically, higher mortgage rates have increased monthly payments, which can slow resale timelines and create uncertainty for flippers.

Ironically, funding isn't really the issue. There is a tremendous amount of capital available for investors right now. Hard money lenders, DSCR lenders, debt funds, and institutional capital providers are all competing for deals. Wall Street has poured billions into the investor lending and non-QM space because they're looking for yield.

What is the feedback you are receiving from your buyer's list?