House flipping is essentially the business buying a home and then selling it again within a year with the intent of making a profit. Often the house will be in a state of degeneration or need some repairs, so it will be bought at a low market cost, fixed up, remodeled, renovated, and then sold at a higher mark up. Because a significant amount of money is usually poured into the property as an investment, the sale price needs to be high enough to not only cover the original amount paid for, but also all the renovations costs, marketing costs, and taxes to still leave a profit margin. However, on the other hand, the flipped sale price can’t be too high and must also be within an affordable range to potential buyers to appeal to a market that currently is made up of:
- First-time homebuyers
- Baby Boomer retirees
- Young families
- Growing families
- Those looking to hold onto the property
Across the United States, the average gross profit, which takes the sale price for the flipped home and subtracts the amount that the property was originally bought for, was up to $72,450. For South Carolina, the average gross profit was less at about $44,550. However, surprisingly, the average amount of time to flip a home nationally was 176 days, and in South Carolina it was 175 days. The strong demand and relatively quick turnaround time indicates that this is a seller’s market due to the need for homes that are already in move-in condition.
House flipping can be very lucrative! However, besides having the liquid cash to invest into a property while it’s being worked on, the other necessity is business acumen! There is a very calculated risk and know-how involved in property assessment to see if it will be worth it. Some of the most common determining factors are:
- Location / Neighborhood
- Condition of the House
- Cost to Repair/Remodel
Ideally, those who want to flip a home will find one that is need of work in an up-and-coming neighborhood. The real estate market challenge currently would be to find appropriate properties to flip that fit under this criteria. The competition for these types of houses can be high. 35% of houses sold were found to be to people who didn’t occupy the home, these included people who were buying properties to rent out or resell, such as real estate investors and those who had multiple properties.
According to a recent report by RealtyTrac, about 17,000+ single-residence homes in the United States were flipped from January to April. This only accounts for roughly 4% of the home sales within that time frame and is fairly low. South Carolina closely followed the national trends, where 3.9% of the homes sold within the first quarter were flipped houses.
Though it is a risky endeavor, for those with the liquid cash and ability to make good renovation choices, house flipping can prove to be a big payout. And it also adds value for those who are looking for quality modernized homes but don’t have the time, expertise, or know-how to personally remodel or hire subcontractors to do so. These homeowners will be able to focus on the normal costs of owning a home, such as taxes, homeowners insurance, and maintenance.