Lin He made a $400,000 profit from flipping a single home earlier this year.
The 3,600-square-foot Malibu home was in foreclosure and on the market for $1.39 million, and he bought it in 2017 for $985,000 but never moved inside.
“Oh man, it was bad. It was a lot worse than I thought it would be,” he said. The renovation took three months and cost about $300,000, plus a host of other expenses, like taxes, staging, and real estate agent fees.
But it was worth it.
He put the house on the market for $1.97 million, exactly double the purchase price, and received a full offer within three weeks of listing it.
Before and after: This 3,600-square-foot home in Malibu needed significant renovations, but after reselling it sold for double the asking price.
Home resales reached an 11-year high in 2017, representing roughly 6% of all home and condo sales, according to ATTOM data.
As home prices have soared nationwide, flipping a home has become more lucrative in recent years. According to ATTOM, the average gross return over the past three years has been 50 percent. From 2004 to 2006, the average return on a home flip was 31 percent.
Related: Rising mortgage rates won't stop home buying
Home flipping soared in popularity after the Great Recession as prices bottomed out and some investors saw it as an opportunity to buy.
“At the bottom of the market, there were deep-pocketed professional investors who were able to get deals for lots of cash,” said Darren Blomquist, senior vice president at Atom.
A longtime real estate veteran, he became an investor around that time: Between 2008 and 2014, he bought more than 100 homes, flipping some and keeping others in his rental portfolio.
Many housing markets have seen prices bounce back to pre-recession levels, with some markets even booming with prices increasing by double digits.
This phenomenal rise prompted Ho to stop flipping properties in 2015 and start to deleverage his debt, selling off part of his rental portfolio and focusing on his design-build construction business.
But when the Malibu home came on the market last year, it was too good a deal to pass up.
It took him and his team three months to renovate the house.
Related: Are you ready to buy a home?
The national property resale rate in the first three months of the year was 6.2%, matching the highest level since the financial crisis in early 2013, according to CoreLogic.
At the time, banks and other institutional investors were active in the real estate resale market, but more recently, more individual investors have entered the market.
“Home prices are rising, which is why we're seeing more trendy and first-time home flippers jumping into the market,” Blomquist said.
But amateur resellers have a tough job ahead: A lack of inventory means prices are rising, and many are buying homes that need extensive renovations, he added.
“Rising home prices are a double-edged sword and the temptation is too great for many flippers. They can buy at a higher price and continue to make a profit as they see prices continue to rise,” Blomquist said.
But flipping isn't as easy as it looks on TV.
“It's not a glamorous job, it's a down-to-earth job dealing with shoddy real estate,” He said. “There's the potential for good profits, but it's not as easy as people think.”
CNNMoney (New York) First Published June 5, 2018, 10:29am ET