How the Fix and Flip Market May Shift

In Q2 2022, profit margins on median-priced single-family home sales hit a new record of 56%, according to ATTOM’s latest report. After taking a slight dip in Q1 2022, gross profits also hit new highs in Q2. Single-family home sales generated a Q2 profit of $123,869 – up 19% from Q1 2022 and up 38% YOY.

Profit margins on sales that were specifically fix and flip investments stayed strong, as the average flip led to $67,000 profit in the second quarter of 2022.

These profit margins show how strong the fix and flip investment market is nationally despite rising economic uncertainty and surging home mortgage rates. These higher rates, combined with record-inflation and soaring food and fuel prices, have tamped down a housing market that was red hot in 2021 and the first half of 2022.

Still, home prices and seller profits surged in the second quarter, after a first quarter that saw a rare dip in real estate investment returns.

Is This the Best Time to Invest in Fix & Flip Properties?

Rising house prices over the past two years have cut the profit percentage on flips, which might lead some to think this isn’t the right time to invest in fix and flip properties. However, ATTOM’s data suggests that real estate investors still have plenty of opportunities to profit in the investment space.

The housing market is still very much a seller’s market, and rising home prices have pushed some prospective homebuyers to choose to rent for now. This opens the door for real estate investors to profit from the BRRRR method, an excellent option for investors that want to create passive income from rental properties and fix and flip investments without a huge initial outflow of capital. This strategy lets flippers do what they do best—add value to properties through renovations—and then hold onto properties as investments to gain cash flow from rising rental rates.

When you understand the basics of the BRRRR strategy, it’s a great way to build your real estate business, grow your property investment portfolio, create passive income, and achieve your goals as an investor.

What Investors Could See for the Fix & Flip Market in 2023

The US housing market has started to slow over the past few months, largely because interest rates continue to climb. Some analysts have projected small declines in home prices over the next year, while others expect prices to increase slightly because inventory is still so limited.

Despite this change in home price appreciation trends, real estate investors are still finding ways to turn a profit.  As the market is changing and evolving, it’s important for investors to evaluate their fix and flip strategies to ensure maximum profit. Finding the right lending partner to finance those real estate investments is a huge part of that plan.

It’s beneficial to remember that not all fix and flip financing is the same. It’s important to find a private lender that has your goals and strategies in mind through the lending process. Lima One Capital offers some of the best fix and flip loans in our space.

We can cover up to 90% of the cost of the property and rehab with a term length of 13, 18, or 24 months. These interest-only hard money loans are ideal ways to minimize out-of-pocket costs during the rehab period.

Our clients have different investment strategies, so we have designed a full suite loan options to allow us to cater to their individualized needs—whether flips, bridge loans, or rental loans for long-term holds. Contact us today to discuss your next deal, or if you have a deal in hand, accelerate the process by applying now.