The flipping real estate concept has captured the attention of many investors as it promises substantial gross profit and quick returns. In fact, about 79,540 properties were flipped during the second quarter of 2024, which is about 7.5% of the real estate sold in that quarter.
Despite the drop in number, purchasing and renovating homes to increase their value is still quite profitable. Unlike building new properties, flipping homes takes a few months, and depending on the upgrades, you may increase your profit by up to 114.7% in the best markets like Pittsburgh. Here are some reasons why flipping real estate can be a great option for long-term investment.
Scalability
Scalability is essential to generating profits in this type of investment. While potential earnings from employment are capped via hourly wages and salaries, flipping properties offers investors limitless opportunities. Every successful flip is a profitable project that can be repeated several times a year. With enough capital, investors can run numerous projects simultaneously, which can multiply their profits.
The ability to scale your operations while building your portfolio is a powerful wealth accumulation driver. Your profits can double if you invest in the best American markets for flipping real estate, like Pittsburgh, Pennsylvania. In places like Santa Clara and San Jose, real estate investors made an average of $350,000 per flip. Flipping several properties in these places can increase your annual income.
High Profit Margin
Unlike building properties, flipping real estate allows investors to purchase low, renovate or upgrade the home, and sell high. If you can get a property low, you can maximize your profit, which is why most flippers purchase it as is. They prefer homeowners who can’t renovate their properties before selling them.
Besides renovating a broken-down home, they also make upgrades that can improve the value of a property. The average ROI of flipped houses in the US in the second quarter of 2024 was about $73,492, which is approximately 30.4%.
Investors who can increase the value of the undervalued and distressed property can even double their profits. The profit margins of such properties are higher than those of most investment opportunities, and handling several projects simultaneously can guarantee even higher returns.
On top of that, you don’t need to purchase expensive home renovation equipment to participate in this business. This means your initial investment won’t include purchasing costly construction tools. That’s because you’ll work with different contractors, including a local roofer who can help you keep the renovation cost down. This will give you more capital to increase your portfolio and earnings per project.
Leverage Market Opportunities
Fix-and-flip is a unique strategy investors use to profit from the many opportunities the real estate markets present. They can identify an emerging market poised for growth and look for investment opportunities in these places. One of the best methods is targeting distressed houses in these neighborhoods.
Most of these properties have to be renovated, which means they can get them at a lower price, renovate them, and sell them high. Leveraging market dynamics is key to investors earning high profits from these properties. This includes knowing and capitalizing on the local market trends at the right time.
Endnote
Flip-and-fix gives investors an opportunity to diversify their income streams while hedging against market volatility. Building a diversified portfolio across various market segments and locations helps investors mitigate the risks in this business. Diversification helps investors adapt to market shifts while creating a long-term foundation for financial stability and wealth accumulation.
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