For those who have access to capital and the means, flipping houses continues to be a lucrative proposition for generating long-term wealth. While the process isn’t as easy as many of the wildly popular home renovation shows would have you believe, each particular project presents its own set of unique challenges. In reality, the same can be said about the industry in general – especially if you look at how things have changed over the years. As far back as 2010, there was an abundance of single-family homes on the market to choose from. But once the renovations were completed, they could be challenging to sell. Today, most house flippers would tell you the exact opposite holds true.
Of most concern today continues to be stubbornly high interest rates, but the conventional wisdom says they eventually have to come back down. Maybe not to Covid-era levels, but any reduction in rates would definitely free up capital and increase overall profitability. In general, overall sentiment for the fix-and-flip marketplace continues to remain high, at least according to a recent survey from private real estate lender, LendingOne. Nearly 250 house flippers from all across the U.S. were surveyed and the results were net positive. Nearly 90% planned to undertake at least one fix-and-flip project in 2025 and anywhere from 32-59% of respondents described market demand in their area as “very strong.”
Regardless of the challenges and obstacles facing today’s house flippers, perceived threats could actually be hidden opportunities.
U.S. Market Snapshot
Earlier this year, ATTOM, the leading industry curator of land, property data, and real estate analytics, released their annual year-end house flipping report for 2024. In all, nearly 300,000 single-family homes and condos were flipped. Gross profit margins for individual flips increased to $72,000, with a 30% ROI when compared to original acquisition prices. And the average time to complete a flip was 162 days, or about five and a half months – a fairly typical timeframe. The report showed plenty of geographical disparity, with the biggest decrease in profit margins found in the South and West.
Threats or Opportunities?
Where some may see threats to profitability, others see opportunity. In today’s marketplace, which varies widely depending on location, there are several factors to consider. Whether you consider them a threat or an opportunity, here’s an optimistic snapshot of where things stand at the moment:
Interest Rates
First and foremost, stubbornly high interest rates, currently hovering between 6.11-7.05%, are quite a change from the bygone era just a few short years ago. Despite the recent economic turmoil with the on-again, off-again tariffs, the Fed has been stoically reluctant to induce rate cuts, fearing the threat of stagflation.
Global Tariffs
While the kneejerk reaction to global tariffs is to see it as a threat to profitability, a deeper dive indicates the fallout actually plays right into the hands of fix-and-flip industry. The biggest competitor to house flippers are the new construction builders who produce mass housing. For new home builders, Tariffs that stick would drastically increase the cost of softwood lumber and gypsum, as the U.S. imports 70% of these products, primarily from Canada and Mexico. Since fix-and-flip renovation projects typically don’t require as much in the way of these new materials, this is not a threat at all but rather an opportunity to capitalize.
Labor Concerns
Labor is yet another perceived threat that shouldn’t be too concerning for the fix-and-flip industry. Though immigrants make up less than 20% of the total U.S. labor market, their presence in the building of new construction has been measured as high as 40%. Because most house flipping operations require considerably less in the way of labor, this is again another opportunity for fix-and-flippers to remain more competitive and profitable.
Available Inventory
In some geographic areas of the U.S., there is a shortage of single-family homes to acquire for future projects. Whenever the market is tight, prices increase and the prospect of profitability decreases. But again, this factor is more of an opportunity than a threat. The good news for fix-and-flippers is the inventory of desirable homes remains historically low, meaning houses that are successfully renovated for a profit are still in high demand. When prospecting, house flippers need to be savvier than ever in quantifying risk for particular projects, strategic in their design decisions, and unfailingly efficient in managing their projects – especially flawless execution during the construction phase.
Practical Advice for Remaining Profitable
While there are numerous shortcuts and intensive planning one can do to reduce the overall investment risk for a fix-and-flip prospect, there is nothing more important than flawless execution during the construction phase of the project. Full stop. But when it comes to practical advice on remaining profitable, below are some other strategic approaches that should help you remain in the black:
Do Your Due Diligence
When evaluating a potential fix-and-flip, it’s wise to search for properties that are the most desirable to the most potential buyers in the area. Factors that influence this include the state of the local housing market, the desirability of a location, the price when compared to market average, a balanced bed/bath ratio, and the level of renovation required to remodel the property.
Crunch the Numbers
To survive in today’s marketplace of less profit margin, you need to become an expert at crunching the numbers – especially when it comes to calculating your project’s potential ROI. While many still strictly adhere to the tried and true 70% rule, beware, as this approach often incentivizes residential investors to acquire low-quality properties with much higher risk factors.
Avoid Extravagance
It’s difficult to avoid having an emotional attachment to your fix-and-flip project, but it shouldn’t come at the expense of profitability. A few years back, when the market was much more forgiving, a premium countertop could easily add value. Now, it simply means going overboard. Stick to the basics, such as focusing the majority of your remodeling effort on kitchens and baths, enhanced garage capacity, open yard space, and good old fashioned curb appeal.
Flawless Execution of the Construction Phase
Once you’ve priced out, ordered, and received your construction materials and secured your subcontractors, it’s a good time for a status check, so conduct a running audit of your budget and timeline. If everything lines up as expected, take it day by day. No shortcuts, no mistakes, and plenty of quality control as you progress through the remodel. Ensure that your subcontractors are completing their tasks on time and on budget. The construction phase itself is the most crucial step in remaining profitable on a fix-and-flip project.
One of the key advantages of the fix-and-flip industry is that we’re agile and opportunistic in nature, and not subject to the same threats as our primary competition of new home builders. Another piece of practical advice for remaining profitable is to ensure you have a solid network of contacts to rely upon. No house flipper can do everything on their own and even the experts need a second opinion from time to time. Never let your personal pride get in the way of potential profitability and the next time you hear of potential threats to the industry, dig a little deeper. Because in reality, a hidden opportunity could easily be staring you right in the face.
About the Author
Matt Lavinder is the Founder and President of New Again Houses®, a real estate redevelopment and technology franchise with over 50 franchise locations across the country. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. .
