Here's how much the average house flipper makes and what you can do to be successful.
House flipping has become very trendy as a real estate investment strategy, thanks to several popular TV shows on the subject. But how realistic are they? Can anyone decide to buy a home, fix it up, and sell it at a profit? Can everyday investors really make money by flipping homes?
Short answer
The short answer is yes. According to our home flipping research, over 407,000 single-family homes and condos were flipped in 2022. The average gross profit from a flip last year was $67,900. That equates to a 26.9% return on investment. It's also worth noting that 2022 wasn't the only standout year. Gross profits from home flips have averaged over $60,000 every year since 2017.
It's important to note that this is gross profit and doesn't include all the costs associated with flipping a property. For example, if you buy a property with a loan, the gross profit calculation doesn't usually include interest costs. And it's important to keep this in mind since you'll likely spend a lot of your time managing the home flipping project.
That being said, it's definitely possible to make money flipping homes, with the average resale generating a respectable gross profit.
Things to consider before reselling a home
You can make a lot of money flipping houses. But despite what you may have seen on TV, it's not an easy business. Before you try flipping houses for the first time, there are a few things you should keep in mind.
First, flipping homes is not a passive real estate investment. It requires a lot of time commitment and you need to be prepared to deal with unexpected situations. If passive income from real estate investing is your goal, there are easier ways to get it.
Second, flipping a home comes with a lot of costs, some of which beginners don't often consider. First, you need to estimate the cost of repairs and renovations, but remember that they are just estimates. Also, many beginners overlook the costs of owning a property. If you're financing, you'll need to pay a mortgage on the property. You'll also need to pay insurance, property taxes, and utilities. Make sure you factor all of this into your calculations and leave some room for unexpected expenses.
Speaking of financing, financing a home improvement project can be difficult and expensive, especially if it's a first-time project. You'll likely have to seek out hard money or other non-traditional lenders, and you'll have to be prepared to pay fairly high interest rates. More renovations are being done with cash in recent years, with only 35% of home renovations purchased with financing in 2022, down from 43% in 2017.
Finally, remember that to be a successful home flipper, you need to have a great team around you – you'll need a great real estate agent, home inspector, contractor, lender, insurance agent, etc. The value of having a great team around you as a home flipper cannot be overstated.
Conclusion
In summary, flipping houses is definitely a money-making business, but it's not an easy business and there's a lot to learn before you get started.
If you're thinking about embarking on your first home flipping project, it's best to learn all you can. Read about the best strategies and practices. Talk to experienced home flippers in your local market to learn what works and what doesn't work for them. And above all, expect and plan for the unexpected, especially while you're still learning.