Thorndale, PA · Member since 2017 · 68 posts · 15 votes
I'm wondering what is the average profit per flip. I attended a RE seminar and the guy teaching the class was saying he won't do a flip unless he makes $50k profit minimum. Which sounds amazing if that is true.
I'm looking to flip to build capital to invest in multi family and I'm just wondering what kind of profit you can expect on a flip?
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
9y
$50k per flip minimum is only 1/3rd of the equation. How much did he invest in total to buy, rehab, and hold, and how much time did it take from purchase date to sold date. i have made over $200k on flips and made $1M on one flip, but the money invested, time taken, along with other factors determine if it was worth it or not. Spouting off total profits is meaningless without knowing the rest of the details.
Point being, as Daniel mentioned above, focusing on the total profit is not wise, focus on all the numbers before deciding if you should move forward or if the deal done was a success or not.
Investor · Menifee, CA · Member since 2015 · 534 posts · 216 votes
9y
Robin Boyer with all that cash you can run a lot of flips!! Some systems and steps involved to get there but multiple flips for sure using borrowed money. A good hard money lender, good marketing campaign and the patience for the right deals. The hard part about the flipping business is finding the deals. SFR flippers and buy and hold investors are in the marketing business! Your gonna have 400K apx and instead of doing 2 with all your cash at once you can do 10. Leverage can take you to the next level if you want to grow a business in real estate investing. If you just want to do a few here and there then that's fine to use all the cash but you never know when that opportunity will come and when it does you don't want all your cash tied up.
Developer · Austin, TX · Member since 2010 · 371 posts · 284 votes
9y
@Robin Boyer with that kind of cash I would look at commercial property again. If your last commercial deal worked for you, why switch gears? Do what you know. You get much better economies of scale with Commercial property as well.
Surveyor · Hemet, CA · Member since 2015 · 797 posts · 112 votes
9y
@John Blackman thank you for the message we are going away from commercial because it did not work for us due to a bad partner. I just got off the phone with a hard mo day lender. So the plan is to get some apartments with 400k flip them and then she said she would loan me like 150k 200k. So we would have another quarter million dollars to throw into rental properties what would be your strategy if you took a hard money loan for 150k.
I am finding vacant lots for 10 to 100k maybe throw a tiny home on it? Rent it for 1300 a month or so. Or more? Southern California rental market is very strong right now.
New York, NY · Member since 2018 · 4 posts · 2 votes
8y
A lot of people replied but just giving you my numbers - we had 89 flip closings last year and averaged about 10% after all closing costs. This figure includes project manager and field super wages. Average hold time whole flip portfolio was 107 days.
The average figures all in were about $168k purchase price and $15k rehab cost. We decided that in cookie cutter neighborhoods, appraisers just don't give you enough credit for your upgrades so it's better to patch and paint and sell for a cheap price and turn your money faster instead of trying to shoot for the moon.
I think flipping is very risky unless you have the means to do at least 1 house per month. Our average is 10% over a lot of properties, with some losing 10% or more and some making up to 30%.
We also had about 50 new construction closings and these make around 10% net as well, again about 90 days from permit to closing.
On a leveraged basis, I think flipping and single family new construction is a good return but when you take taxes into consideration, I think that in all cases except high end houses, rehab to rent is a better strategy. For example, on the new construction we make about $20k off a $200k house, but we can rent that house for $1,800 with a low expense ratio (since it's new) of 25-30%, making $15k in one year off rent, and still having the $20k of equity profit when we sell.
Decatur, GA · Member since 2016 · 27 posts · 5 votes
8y
After flipping multiple houses and comparing with the national averages I would not base it off the $50,000 average. it's very dependent upon where you live, how much actual work it is entailing and the time spent. if it's absolute minimal stress and time required and you can make a secure 10,000 dollars in profit for flip I would prefer that before a more time-intensive and stressful 50000. your average is going to vary significantly in different markets. another thing people tend not to include in their averages is time of holding and securing investment. I have found all of the revolving factors tend to bring that "profit" margin down significantly.
Decatur, GA · Member since 2016 · 27 posts · 5 votes
8y
I should also say those seminar guys 10 to be used car salesman in style lol. next they will have an amazing seminar for only $500 that will teach you how they make $50000 per flip. after that seminar they will work with you one-on-one for an additional $10,000.
No, in the south. NY too tenant friendly for courthouse step purchases unfortunately. Maybe up state is different but def in NYC not really feasible for our business model.
Assuming all other aspects of the deal are the same, what is your minimum acceptable gross profit margin for flips of each level of renovation?
Impossible to answer as there are so many factors that come into play. Price points, market conditions, personal desires, ROI vs actual net profit for the work, etc.
For renovation level 1 above, if I am buying at a purchase price plus rehab of under $200k, then I am fine with popping a $20k profit on each one assuming I am doing volume. If I am spending $500k, then I certainly want to make more and so on.
Same goes for every other level. Typically, in my current market, & with current local market conditions here in So Cal, I target a purchase price plus construction budget in and around $1M and expect to sell at or around $1.3M which will leave me somewhere between $100k and $175k in profit per deal after all other costs with each deal taking about 7 months. These are full addition with permits and demo most of existing. I would not do a deal like this if I did not expect at least $100k in profit. A recent deal had a $700k purchase, $260k construction, and sold for $1.335M. A solid triple of a deal and not easy to find these days. I should clear around $200k on it.
Real Estate Investor · Los Angeles, CA · Member since 2013 · 2k+ posts · 694 votes
8y
Ultimately you have to look at your annualized ROR to see if a flip is worth it. 10% on a flip that takes 1 year is a whole lot different than 10% on a flip that takes 1 month.
After that it's worth looking at dollar amounts, as generally the construction risk is similar whether you flip a 100K house vs a 500K house of similar sizes, making the risk reward equation much more favorable in higher price points.
Investor · Davidson, NC · Member since 2016 · 13 posts · 2 votes
8y
I have flipped over 300 homes and some I've lost and some I've won. When I put all of them in a spreadsheet I average 23k per flip qith an average but to sell hold time of 3.2 months. Hope that helps someone take a realistic view.
Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
8y
Originally posted by @Account Closed:
You Can Lose a Lot of Money Flipping Houses Erik Sherman
Jun 14, 2016
House flipping is hot. Last year marked a high, since 2007, in the number of people trying to buy houses cheap, fix them up, and sell them, according to real estate information company RealtyTrac.
And who can blame the newcomers when the average gross profit in the first quarter of this year for flipping was $58,520? Keep it up and maybe you could even get your own house flipping reality TV show. There's just one problem: lots of people are losing money.
An analysis RealtyTrac ran for MONEY showed that 12% of flips sold at break-even or at a loss before all expenses. In 28% of flips, the gross profit was less than 20% of the purchase price. Twenty percent is "typically the minimum that would at least cover rehab costs, carrying costs, and other expenses incurred by the flipper," said Daren Blomquist, RealtyTrac senior vice president.
Your comment: "An analysis RealtyTrac ran for MONEY showed that 12% of flips sold at break-even or at a loss before all expenses. In 28% of flips, the gross profit was less than 20% of the purchase price."
That is why I switched from doing fix & flips to selling to tenant buyers, getting $25,000 down and cash flowing the property. Fix & flip is pretty risky and highly taxed and way too much work.
Rental Property Investor · Corvallis, OR · Member since 2018 · 840 posts · 1k+ votes
7y
@Justin Westmoreland Some general input here. Back in 2002-2009 I would look for anything that made sense. I live in the Pacific NW--Willamette Valley in Oregon specifically. In those days, I could buy a fixer for $80-100K and most expensive buy was $150K. The cheaper houses I could sell for $130,000 to $150,000 fixed, and some more expensive houses fully repaired went for $229,000 to $315,000. Most houses were the lower levels and profit ranged from the lowest of $16K to $64k, and that was after holding costs, escrow fees, and every expense associated with the deal.
The typical deal was around $30K, but like @Jay Hinrichs said, its harder today than EVER before! I am seeing the lowest amount of product and 10 times the "investors" trying to outbid everyone else to try and make something. I see realtors now doing the "best and final" price taking extra week to pick their best deal. Banks are in the drivers seat a little more than they were back when I was going harder. I did a word of mouth deal couple months ago and easier flip ever with only $3000 in quick rehab, and turned $23,000, and also did wholesale flip for $7000 on something I had under contract and decided it was too major for me to tackle with my full time W2 job.
All in all, I see people willing to flip for $10,000-15000 and the safety with that margin makes me nervous considering how bad these properties are upon first glance. In the past, if I set my sights on a deal I typically made the deal happen. Today, the last 10 deals I have looked at, nothing is working out! Really tough market right now for flip margins.
Real Estate Investor & Consultant · Los Angeles, CA · Member since 2016 · 620 posts · 386 votes
7y
@Justin Westmoreland what we do..and its a good rule of thumb to use, is that with our estimations and projections, after all escrow/taxes and agent fees are paid at the end, we look to make 7-10% of the sale price net. If its less than that, we skip it.
Thus, if we sell a home for $1.0M, we want to take home $70k-100k free and clear after all escrow closings.
Specialist · Cleveland, OH · Member since 2018 · 1k+ posts · 666 votes
7y
@Justin Westmoreland all depends on your area, and the amount you are investing. IMO you should look at the % not the dollar amount. 30 - 45% % is the norm, but I do them in 2 weeks or so..... good luck to all
Specialist · Cleveland, OH · Member since 2018 · 1k+ posts · 666 votes
7y
@Shawn Ward you will do a deal where you invest 1mill and make 70- 100k????? Hmm I am not sure if I am missing something but I would not touch that. 7- 10% on a mill, over say 6 months, assuming it takes 6 months like most. good luck to you
Real Estate Investor & Consultant · Los Angeles, CA · Member since 2016 · 620 posts · 386 votes
7y
@Bob Prisco I do not invest a total of $1mill of my own money. Our deals are 100% financed by investors and HMLs.
So, the deal is financed at $1mill, and as the executors of the flip, yes, I make $70-100k free and clear within 6-8 months. And we do multiple deals at a time.
Developer · LA, Nashville TN · Member since 2015 · 295 posts · 75 votes
7y
My first flip was a flop and I made 4k - essentially nothing and spent 1.5 years of headaches and TONS of time.
I'm on my second flip which I hope to make some money next spring, praying Fed doesn't hike between then again and destroy the market.
I really like the 70% rule but it's unreasonable these days unless you're talking about high end illiquid markets, 15% is more realistic. I operate in the 200-400k range so a good profit is 35k - about 15% not including RE sale commissions. So you almost split that with the realtors and brokers.
In general from the flip transactions I am a part of here in Connecticut as an agent and investor if you are making 15% of the ARV in profit you are doing well. If that number jumps up to 20% and above you are knocking it out of the park. So for a $200,000 ARV that is a 30k profit.
Very important for new investors entering a market to know what a reasonable profit margin is for their flip projects. If your profit expectation is to high and the numbers do not ever seem to work on potential deals, see if your expectations need to be re-aligned to the market performance.
I would be looking for a minimum of 20% net profit per deal.
But then I have a theory, if its a rising market why flip? it will probably be worth more in 18 months, with no rehab
The reason is that prices rise maybe 5-10% in a year. You can get 20% from your flip and then another 20% from another flip while you are sitting on a property with your funds tied up hoping the market goes up 10%