Analyzing the Scope of House Flipping in 2021 – Avoid These 5 Common Mistakes!

 

Patrick Iturra Report

Home flipping is quite popular in America. It is the process of buying an income-generating real estate asset and reselling it for profit within 12 months. It has been one of the topmost aspirations of anyone looking to make profits from real estate investing. 

Understanding the current scenario: House Flipping in 2021

Due to the coronavirus pandemic, there is a low supply of labor and material, high prices, and the economic slowdown has made things worse!  

Despite the long list of obstacles, more than 80,000 single-family homes and condos were sold during the year’s second quarter. It accounts for about 5% of house sales in America. 

The volume is far lower than how much people used to sell in the past decade. But, still, this is a good sign of a bright future ahead! 

However, the profit margins have decreased! The gross profit per sale is around $67,000 during the second quarter. However, the return on investment on every flip: the ROI for this quarter was 37.2% compared to the 40.6% last year. It was the lowest point since the first quarter of 2011 when the market was recovering from the critical hit of the 2008-09 housing crisis. 

The average price of homes flipped in the second quarter was an all-time high of $267,000. It is a 10.6% increase from the first quarter and 18.7% from last year. It is one of the most significant interim price hikes from properties since 2005. 

Here’s a list of states that have seen an increase in flipping profits: 

  • Springfield, Massachusetts (Flipping profits increased up to 114%). 
  • Albuquerque, New Mexico (Flipping profits increased up to 103%).
  • Springfield, Illinois (Flipping profits increased up to 95%).
  • South Bend, Indiana (Flipping profits increased by 86%).
  • Boston, Massachusetts (Flipping profits increased up to 79%).

Some of the states that have seen a decline in flipping profit: 

  • Savannah, Georgia (80% decline). 
  • Tuscaloosa, Alabama (76% decline). 
  • Salisbury, Maryland (73% decline).
  • Evansville, Indiana (71% decline).
  • Memphis, Tennessee (80% decline).
  • Lakeland, Florida (75% decline).
  • San Francisco, California (74% decline).
  • Columbia, South Carolina (73% decline).
  • Palm Bay, Florida (73% decline).
  • Davenport, Iowa (68% decline).  Data Source: Attom

Another major factor that plays a significant role here is this decline in the materials required to renovate and refurbish their properties. Also, there are inflation and supply chain disruptions from the pandemic. 

As a result, most home flippers pay the high cost for properties like an average consumer. The high price eats up their profits. Also, there are a lot of common mistakes in the whole process of flipping the house. 

Lack of experience in rehab properties

5 Common Mistakes Done by Newbie & Experienced House Flippers: 

1.) Spending too much on the house

 

Many people spend too much on the house. You have to do your research and make the correct estimate of every property. Follow the 70% rule, where you should never spend more than 70% of the projected after-repair value (minus repairs) while buying a property. [REI Strategic Advisor]

You have to negotiate and make sure that you get the property with formula, and you would never go wrong! 

2.) Making the Wrong estimation of repairs

This is where you need to have the right contractor who gives you the correct quote for the job. Many contractors try to overcharge you, and it takes some experience to make the accurate estimate of repairs in any property.

The quality of workmanship in repairs also impacts the minds of your buyers. Take quotes from multiple contractors and select the one that seems fit for the job. Remember, the main goal is profit-making, but you have to ensure that repairs are done well.

3.) Taking big projects in hand! 

This is a newbie and experienced house flippers as they take projects higher than they can afford. High aspirations are great, and you should have them, but if it fires back, then it won’t end well! 

Always make sure that you can manage your house flips, do not go overboard with anything. Do not attempt to make something extraordinary; identify what sells and what not! 

Start slow, but have high aspirations! A more considerable property has fewer buyers, and it might take longer to sell! A small family home has higher chances of marketing rather than a big property. Also, look for work properties that require minimal work, and that way, you can flip it easily. 

4.) Not understanding the demand in the market

This is where things go wrong for many people, as most flippers do not understand the market. You need to do your market research, understand the demand of the market. One pro tip is to keep a real estate advisor on board who takes care of all the research. 

5.) Overpricing the home when selling

Setting the wrong price for the property decreases its chances of selling because nobody wants to buy an overpriced property! People always look for the correct value for their money. But many flippers make this mistake quite often, and they do not put the right price onboard. 

Summing Up – Taking the right approach is the Key! 

In the above section, we have discussed house flipping in 2021, and there is a decrease in profits on house sales. Even so, we are still recovering from the after-effects of the Coronavirus pandemic. There is a huge opportunity to make good profits from house sales. 

Taking the right approach is the Key! Over the past 24 years, I have worked as a real estate consultant and strategic investment advisor for all my clients. I take the complete responsibility to make sure that you get the desired profits from flipping your property. I work with a specialized team to assess the market and evaluate a property’s condition. 

Once you have finalized the property, I will help you with the negotiations and get the property at the right price! 

I am always here to help. I want you to get the best returns for your investment!

Still have queries regarding home flipping, contact me today! 

 

Patrick Iturra Report

 

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