Here's how much the average house flipper makes, and what you can do to set yourself up for success.
Flipping houses has become extremely 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 for a profit? Is there really money to be made for everyday investors by flipping houses?
The short answer
The short answer is yes. According to our house-flipping research, there were over 407,000 single-family homes and condos flipped in 2022. The average gross profit on a flip last year was $67,900. This equals a return on investment of 26.9%. It's also important to note that it wasn't just 2022 being a standout year -- home-flipping gross profits have averaged over $60,000 in every year since 2017.
Image source: Getty Images.
It's important to mention that this is a gross profit and doesn't include all of the expenses involved with the flip. For example, if you finance the property, gross profit calculations generally don't include your interest expense. And also consider that you're likely to spend many hours managing your house-flipping projects, so it's important to keep this in mind.
Having said all of that, there is definitely money to be made flipping houses. The average flip generates a nice gross profit.
Things to consider before flipping houses
There is a lot of money to be made flipping houses. But despite what you may have seen on TV, it isn't easy money. Before you decide to try your first house flip, there are a few things you need to keep in mind.
First, flipping houses is not a type of passive real estate investment. You will need to dedicate a lot of time and must be prepared to handle unexpected situations. If your goal is passive income from a real estate investment, there are other ways to get it that are far easier.
Second, there are lots of costs involved with flipping houses, including some that beginners don't often consider. For starters, you'll need to estimate your repair and renovation costs, but keep in mind that they are just that -- estimates. Plus, many first-timers overlook the holding costs of the property. If you finance, you'll need to make loan payments on the property. You'll also have to pay insurance, property taxes, and utilities. Be sure to account for all of these, as well as some wiggle room for unexpected expenses.
Speaking of financing, it can be difficult and expensive when it comes to obtaining financing for a fix-and-flip project, especially if it's your first one. You'll probably have to look at a hard money or other non-traditional lender, and you can expect to pay a significantly higher interest rate. More flips have been done in cash in recent years, with just 35% of house flips purchased with financing in 2022, down from 43% in 2017.
Finally, keep in mind that in order to be a successful house flipper, you'll need to have a good team around you. You'll need an excellent real estate agent, home inspector, contractor(s), lender, insurance agent, etc. It's tough to overstate the value of having a good team around you as a house flipper.
The bottom line
To sum it up, you absolutely can make money flipping houses. However, it's not an easy business, and there's a lot to learn before you get started.
If you're thinking about starting your first house-flipping project, the best thing you can do is to learn all you can. Read about the best strategies and practices. Talk to experienced house flippers in your local market and learn what works and doesn't work for them. And above all, expect (and plan for) the unexpected, especially while you're still learning.
FAQs
The short answer is yes. According to our house-flipping research, there were over 407,000 single-family homes and condos flipped in 2022. The average gross profit on a flip last year was $67,900. This equals a return on investment of 26.9%.
What is the house Flipper 70% rule? ›
The 70% rule helps home flippers determine the maximum price they should pay for an investment property. Basically, they should spend no more than 70% of the home's after-repair value minus the costs of renovating the property.
Can you actually make money flipping houses? ›
Yes, it is a good idea if you are thorough. On average, home flippers make a profit of 10%-20% of the after-repair value of the property. This makes real estate flipping a good investment and a lucrative business. But, it is important to know the advantages and disadvantages of flipping to ensure a successful flip.
How much does the average house flipper make a year? ›
How much does a Real Estate Flipping make? As of Sep 11, 2024, the average annual pay for a Real Estate Flipping in the United States is $86,796 a year. Just in case you need a simple salary calculator, that works out to be approximately $41.73 an hour. This is the equivalent of $1,669/week or $7,233/month.
Is house flipping still profitable in 2024? ›
The most recent data indicate that flippers are enjoying an uptick in profits. According to ATTOM, in the first quarter of 2024, the typical nationwide resale price on flipped homes increased by 4.1 percent over the fourth quarter of 2023.
Do most house flippers lose money? ›
It is common for experienced house flippers to achieve a return on investment that ranges from 10-20%, after factoring in all the expenses involved when flipping a house. If you assume a 15% return, that would mean a net profit margin of: $100,000 House Flip = $15,000. $250,000 House Flip = $37,500.
Why is house flipping illegal? ›
The lender finds out the truth about the property's value and can't possibly recoup its money. Simply put, this type of “flipping” is a crime because it violates California's fraud laws. In fact, it is sometimes referred to as mortgage fraud or loan fraud.
What is the average return on a house flip? ›
How much profit should you make on a flip? On average, a rehabber shoots for a 10 to 20% profit of the After Repair Value, but it varies depending on the market and the specific project risks. A 10% profit would be on the lower end, and a 20% profit would be considered a 'home-run' by most rehabber's standards.
Is flipping houses still worth it? ›
Interest rates have become more stable, encouraging a renewed interest in house flipping. Attom Data Solutions reports a 27.5% return on investment, translating to around $66,500 in profit. Compared to the stock market's average return of 10%, house flipping stands out.
What are the pros and cons to being a house flipper? ›
Cons
| Pros | Cons |
|---|
| Allows flippers to quickly capitalize on sales if home prices continue to rise | Puts flippers under pressure to sell houses in short order |
| May provide significant tax benefits in certain scenarios | Costs may rise quickly if deliveries, work and inspections don't happen on time |
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Ellen Degeneres may be the most well-known celebrity house flipper, with several successful flips under her belt.
Is selling to a house flipper a good idea? ›
While selling to house flippers offers advantages such as speedy transactions and minimized need for extensive repairs, it comes with the potential drawback of receiving offers below market value to leave room to pay for the work required to redevelop a property.
Is house flipping high risk? ›
The most obvious risk of flipping houses is losing money. The worst thing that can happen on your flip (besides someone dying or being severely injured), is that you spend 4 to 6 months rehabbing a house only to wind-up losing money on the project.
Is flipping houses a risky business? ›
One of the biggest risks is that you may not be able to sell the property for a profit, or the repairs and renovations may cost more than you anticipated. You also need to be aware of the potential for fraud and scams when flipping houses. Not every house is a good candidate for flipping.
How long does it take to sell a flipped house? ›
Selling the Property: 1–8 Weeks
The last part of a successful flip is selling the property. This also depends on how hot your market is, but it generally takes between 1 to 8 weeks.
What is the rule of 70 formula? ›
The Rule of 70 Formula
Hence, the doubling time is simply 70 divided by the constant annual growth rate. For instance, consider a quantity that grows consistently at 5% annually. According to the Rule of 70, it will take 14 years (70/5) for the quantity to double.
What is the 30% and the 70% rule in real estate? ›
In order to successfully flip houses you need to buy properties at a big enough discount to make a profit and cover all of the other 'Fixed Costs' (buying, holding, selling & financing costs). When you multiply the After Repair Value by 70% you are discounting the property by 30% to cover your Profit and Fixed Costs.
Why 70 percent arv is important in a house flip? ›
The 70% rule of house flipping helps flippers determine a maximum purchase price as they search for real estate investing opportunities. The general basis of the rule is that investors shouldn't pay over 70% of a property's after-repair value (ARV) minus the repair costs necessary to improve the property.
What is the code for flipping houses? ›
Code NAICS 531390 covers “other activities related to real estate," including real estate flipping, real estate holding companies, and real estate development.
