Flipping houses for a living isn't for the faint of heart. There are numerous challenges house flippers routinely face, from financing issues to renovation delays to permit and inspection holdups. But if you have the stomach for house flipping, now may be a good time to get in the game.
While house-flipping activity declined during 2020's third quarter, profits soared to their highest level in 20 years, reports ATTOM Data Solutions, and the median price of a flipped home was $240,000 during that time. Meanwhile, the gross profit on the average flip was $73,766 during last year's third quarter. That's up from $69,000 in 2020's second quarter and $61,800 during the third quarter of 2019.
Now there's a caveat -- these figures don't include money investors put into those homes to make them sellable. Rather, they simply account for purchase and sale prices. But last year's third-quarter profits were the highest since 2000, when ATTOM first began tracking house-flipping data. And so if you've been thinking of getting into house flipping, that could be motivation enough to get started.
Is now a good time to start flipping houses?
Flipping houses can be a lucrative endeavor, especially if you're handy and are capable of doing renovations yourself without having to pay for much added labor. But the more you get into outsourcing, the more your costs rise and your profits shrink, so that's something you'll need to consider.
Furthermore, while house flippers may be doing well in today's market, finding available homes to buy is a challenge. On a national level, housing inventory decreased 39.6% in December compared to the previous year, reports Realtor.com. That means you might really struggle to find a home that needs an update -- or you might struggle to find one at the right price. In December, the median home listing price was $340,000, which represents a 13.4% jump from the previous year.
On the other hand, listed homes have been flying off the market. In December, the typical home sold in just 66 days, which is 13 fewer days than a year prior. In the world of house flipping, that's huge, because the sooner you're able to move properties off the market, the sooner you're able to snatch up new homes to invest in.
The bottom line
House flipping is a good business to be in or try out right now, but be prepared to spend extra time finding the right homes to invest in. Also be careful not to overimprove any home you wind up purchasing. Given how strong buyer demand is, in today's market, you might easily get away with making midrange renovations instead of going all out and sticking to high-end upgrades. (Besides, upscale renovations don't tend to offer a great return on investment, whereas you'll generally add a higher percentage of resale value with midrange updates.) With mortgage rates sitting near record lows and inventory at a standstill, buyers are desperate for homes, and many will no doubt be willing to relax their standards in today's housing environment.