Is The House-Flipping Boom Over for Investors?

In the past decade or so, buying a fixer-upper, updating it, and then selling it for a nice profit attracted seasoned real estate investors and newbies alike. Many professional and amateur investors wanted a piece of the quick-profit pie. And why not? Television shows make it look easy and fast—something anyone with a little bit of knowledge and a few resources could do.

However, today’s housing market has been incredibly difficult for house-flipping TV stars—and it’s challenging for smaller business owners too. The house-flipping market has always been more complex than simply buying properties for a low price and reselling them at a higher price.

Before you decide if this endeavor should be your next career or a potential side hustle, it’s important to evaluate how the market is changing and making it harder to find profitable flips. If you determine that the flipping industry still offers enough value, there are a few tactics you can employ to maximize your earnings, no matter how tight the real estate market gets.

The State of the Flipping Industry in 2024

During the surge of housing demand in 2021, the industry was flooded with eager house flippers. If someone found a lucky or strategic purchase, fixed it up with sufficient upgrades, and put it back on the market, they could easily net significant profits in very little time. But those ideal market conditions no longer exist. Instead, everyone interested in buying homes should reevaluate their view of the housing market based on the following factors.

Interest Rates Are High

As of May 2024, the loan rate for a 30-year fixed mortgage is 7.06%. The rate has been fluctuating around 7% for months, and there’s little indication it will fall back down to the 3% rate the market saw in 2021.

These steeper interest rates make it harder to buy homes and place them in the right bracket for easy flips. Not being able to secure an affordable loan will hold back many flippers who can’t buy homes outright. 

House Prices Are High—But Flat

In Texas, house prices are still very high. Homes in Dallas had a median sales price of $376,200 in the last quarter of 2023, and Houston-area homes had a median sales price of $336,600. That bodes well for sellers who purchased their homes in the past, but that’s not an ideal strategy for flippers. House-flipping focuses on short-term holds, and the key is to buy low and sell high.

However, the markets are flat. Dallas’s one-year appreciation as of Q4 2023 was 0.3%, and Houston’s was -0.4%.

New Developments Are a Credible Option Once More

Another market factor to consider is competition from new builds. During the past three to four years, housing construction has slowed to a virtual standstill. Labor costs have skyrocketed, and there have been severe material delays. These factors mean homebuyers who would have bought a new home ended up in the resale market, and flips with extensive remodeling evoke a satisfactory sense of newness.

Related: Beyond Traditional Agents: The Benefits of Flat-Fee MLS Listing 

That same appeal is dwindling because new constructions are readily available again. Buyers can purchase homes with ample square footage, modern building code compliance, new appliances and materials, and all the other perks of new builds. The interest in flips isn’t gone, especially as new builds typically exist on the growing outskirts of established metroplexes, but they are negatively affecting the market.

Profit Margins Have Gone Down

The industry simply isn’t as strong as it used to be. In 2022, 8.4% of homes were flips based on total sales value, but in 2023, that figure decreased to 8.1%. It plummeted even more as a measure of homes sold, falling from over 8% to just over 6%. The per-home average profit also went down, with the average house flip yielding an ROI of 27.5% (compared to 49.2% in 2016). 

How to Succeed in Today’s House-Flipping Market

Despite all the bad news, there’s still a lot of room for flippers to turn a significant profit. By strategically selecting homes, having a streamlined selling strategy, and optimizing every step of assessing and fixing up your flips, you can easily win deals and benefit from a profitable market. Consider these best practices: 

Use AI as Part of Your Research Process

Running a profitable business isn’t just about increasing revenue—it’s also about reducing expenses. AI-powered tools can replace a lot of labor- and capital-intensive processes in your operations. This includes:

• Combing through available listings and pinpointing properties that are the most likely to fit your needs
• Analyzing local neighborhoods to determine where you should focus your interests
• Running smart pricing analyses to see what a fixed-up property could be listed for on the market
• Refining your marketing process with AI-optimized platforms 

Related: How to Unlock Potential with Real Estate Software for Investors

Continually reviewing how you work and finding opportunities to automate tasks or improve strategic processes can help make your business as lean as possible.

Focus on Fast-Moving, Cash-Flow Positive Deals

Based on current market trends, it’s becoming more difficult to find high-ROI properties that increase in value. Savvy investors should instead acquire more properties. While the cash flow per property is less, the increased number of deals can still help your business reach its financial goals. 

Instead of waiting and searching for unicorn properties, shift to closing on properties you can quickly improve and resell. Adopting a greater volume of properties with lower holding costs is a stronger approach in a saturated market. 

Use a Pay-as-You-Go, Flat-Fee MLS Listing Model

Without any outside support, FSBO methods can be daunting, particularly if an investor has multiple properties. Fixing up a home to sell takes enough time, and selling it only adds to the burden. Some believe the choice is limited to going at it alone with the FSBO route or paying a three percent commission to an agent. 

There are discount and flat-fee brokers who will sell a property at a lower rate, but the investor still spends around two percent on an agent. If the home sells quickly, that two percent is a hefty price to pay when accounting for all other factors. Thankfully, there’s another option.

In a pay-per-day model, the investor pays a low daily rate while the property is on the market until closing. If the home sells quickly, the investor pays only a couple hundred bucks. What comes with that pricing model? Plenty.

In this modern approach to home selling, the investor sells their house on their own but with a lot of extra support to speed up the process and reduce the amount of labor that goes into it. For instance, for a daily rate, the investor gets MLS access, which is a must for anyone selling property. With MLS access comes syndicated postings on other popular real estate sites, gaining higher visibility with much less effort.

Incorporate Investor Tools Into Your New House-Flipping Strategy

Modernize your approach to house-flipping to match the challenges and opportunities of today’s market. While the booming house-flipping industry of 2021 is essentially over, there are still lucrative opportunities across Texas for real estate experts, contractors, and savvy investors who want to invest in flips instead of buy-and-hold properties.

At Listing Spark, we offer easy-to-use flat-fee MLS listing services so you can sell properties without paying the hefty commission fee listing agents charge and keep more cash for your business. We also provide smart pricing tools, house photography, marketing solutions, and negotiation management tools so you can quickly purchase and resell every property in your portfolio. Contact us today to learn more about our services and start developing a new, more efficient real estate strategy for successful house-flipping.