Investor interest in fix-and-flips is soaring as profits climb once again, new data shows. Here’s where your clients should be searching.
Home flipping hit its second-highest level in about a century during the first quarter of this year, according to new data from ATTOM Data Solutions. Flips comprised 9% of all sales, according to ATTOM’s 2023 U.S. Home Flipping Report(link is external). But while profits and returns on investment are on the rise compared to a year earlier, they remain low relative to the past decade.
The gross profit from a typical flip in the first quarter rose to $56,000, but that figure is down 20% from $70,000 a year earlier, ATTOM’s report shows. The first-quarter figure also marks one of the lowest points since the housing market began recovering from the Great Recession in 2012. It translates to a 22.5% ROI on the typical flip, which is less than half of the 51.5% level recorded in mid-2020.
Nevertheless, the latest data shows that “home-flipping investors across the U.S. may have finally halted the decline,” says ATTOM CEO Rob Barber. “In the first quarter, profit margins showed a slight upward turn after an extended slump, while interest in flipped homes continued to rise among buyers. However, investors shouldn’t assume they’re out of the woods yet.”
Barber notes that home-flipping costs are increasing, which can easily erase a 22% return on gross profits. Still, “the first-quarter trends offer some hope for investors, indicating that brighter times may lie ahead,” Barber says.
Where to Find That Diamond in the Rough
Certain areas of the country are proving to be more popular for home flips. For example, on the metro level, home flips made up the largest portion of home sales in the first quarter in these areas, according to ATTOM’s report:
- Macon, Ga.: 16.8%
- Atlanta: 15.3%
- Jacksonville, Fla.: 15.2%
- Memphis, Tenn.: 14.4%
- Clarksville, Tenn.: 14.3%
Where is home flipping the most lucrative? The leading metros are:
- Shreveport, La.: average ROI up from 38.6% in the fourth quarter of 2022 to 92% in the first quarter of 2023
- Lafayette, La.: up from 25.5% to 72.8%
- Savannah, Ga.: up from 14.3% to 56.8%
- South Bend, Ind.: up from 8.5% to 49.4%
- Peoria, Ill.: up from 40.7% to 75.7%
Source: nar.realtor
