The pandemic has created a storm of challenging conditions for home flippers. Home prices are rising, inventory is at historic lows, and economic struggles abound. Foreclosure moratoria have only added to the challenge.
The result has been a steadily declining rate of home flipping across 2020. According to a new report from ATTOM Data Solutions, home flipping rates dropped in the third quarter of this year in 93% of markets nationwide. A mere 5.1% of all home sales were flips -- down from 6.7% in the second quarter and 5.5% a year ago. In some cities, the rate of home flipping fell more than 44%.
But while the declines are certainly a sign of today's uniquely challenging market, there's also a silver lining here. According to ATTOM's data, investors who have remained in the game are making more profit than ever. The average flip netted a whopping $73,766 in the third quarter, amounting to a 44.4% return on investment (ROI) per property. It's also a difference of almost $12,000 in just the last year and the highest flipping profit seen in at least two decades.
Are you a flipper who's been sitting on the sidelines during the pandemic? It might be time to get back on the field. Here are four ways to ensure you're snagging those sky-high profits and getting the most out of your deals.
1. Add a home office
With so many people working from home these days, home offices are in high demand -- and so are houses that have them.
It doesn't even have to be a full room, either. If your property is limited on space, consider turning a closet or small nook into a functional workstation. As long as it's set away from the busier areas of the house, it should do the trick.
2. Nix the open floor plan
Privacy is at a premium these days, especially in households where multiple people are working from home, kids are in virtual school, or all of the above.
For these buyers, the open floor plan is a hard pass. Instead, they're looking for clearly defined spaces: rooms with doors, set-off living areas, and plenty of walls to block out the noise of constant Zoom (NASDAQ: ZM) calls, kiddos fighting, and more.
3. Focus on the outdoor amenities, too
People are tired of being stuck indoors and looking for amenities and features that let them escape the confines of the house -- or even get more active. While you probably won't want to add a pool or tennis court to your home's backyard, even small outdoor additions can make a big difference. That might mean adding a nice patio, installing a deck, or even building a fire pit for some nighttime relaxation.
4. Consider listing the home yourself
Finally, if you really want to up your profits, consider listing the home yourself when it comes time to sell. Real estate agents take a whopping 6% or more of your sales price, which can cut considerably into your bottom line.
With demand so high, you can probably get by with listing and marketing the property yourself and just bringing in an attorney to handle the contracts and paperwork. Skipping the 6% commission on a $200,000 house would mean keeping an extra $12,000 in your pocket -- a considerable amount (or maybe even a down payment on that next flip?).
The bottom line
Home prices are rising, inventory is limited, and overall home flipping rates are down. But if you do manage to find the right property, the potential for profits is huge. Just make sure you analyze the market, right-size your offer, and focus on the right projects and upgrades when renovating the house. The rest should fall in line.