The Short Answer
Although the average gross flipping profit has seen a decline over the past few years, real estate investors can still reap lucrative rewards through this real estate investing strategy. Achieving success in this arena relies heavily on knowing the prime locations for home flipping in the United States.
The average gross flipping profit hit $67,900 last year, according to ATTOM Data, but then went down to $53,500 in Q4 of 2022. However, the average gross flipping profit is recovering in 2023, reaching $56,000 in the first quarter. The average ROI on house flips in Q1 of 2023 was 22.5%, showing good potential for real estate investors who want to use this profitable strategy.
The Rise of House Flipping
With the rise of popular house flipping shows making this real estate investing strategy a hit, home flipping contributes to a larger market share than ever before. In 2017, house flips accounted for just 5.7% of all home sales, in 2022 this number rose to 8.4%, and in the first quarter of 2023 it’s hit 9% already, according to ATTOM Data. That’s a total of 72,960 single-family homes and condominiums in the US that were flipped!
In the first quarter of 2023, the average duration from home purchase to resale on house flips increased to 178 days, which marked a rise from 165 days in the fourth quarter of 2022 and 163 days in the first quarter of 2022. Although flipped homes are spending longer on the market, investors can still make a profit as the number of flipped homes in relation to homes being sold rises each year.
For real estate investors who are just starting out in the house flipping game, or who are looking to bolster their real estate investing portfolio, these are the house flipping statistics you need to know in 2023.
What’s the Average Cost of Flipping a House?
The cost of home flipping can vary significantly depending on various factors, including the location, size of the property, scope of renovations and the renovation costs, holding costs, and market conditions. A general rule of thumb is that investors should anticipate spending approximately 10% of the home’s purchase price to flip the property.
For instance, if you acquire a house for $150,000 and intend to sell it for $300,000, it’s advisable to set aside at least $15,000 for flipping expenses.
To calculate the total required investment, investors need factor in:
- Purchase price
- Renovation costs – including building materials, cosmetic materials and labor
- Closing costs – which apply to those who have financed a property and are usually between 3% and 6% of the purchase price
- Holding costs or carrying costs – which are the expenses needed to keep the property running before selling it
- Taxes – state and local property taxes range from 0.28% to 2.49% of the home’s value
- Selling costs – these include marketing, real estate agent commission, and other costs that come with selling a home
How Much Money Can You Make With House Flipping?
For investors who choose to begin flipping houses in 2023, there are a few house flipping statistics that may be quite enticing.
Average gross profit and ROI
Data source: ATTOM Data (2023)
According to ATTOM Data, in 2022 the average return on a house flipping investment was 26.9% and the gross profit was $67,900. There has been a decline in ROI for house flipping over the last 5 years, however gross profit has shifted up and down, depending on home prices which have been unstable since the pandemic.
During the first quarter of 2023, however, there was a modest improvement in the average gross flipping profit and gross profit margin, compared to the fourth quarter of 2022. This was driven by a slightly accelerated increase in median resale prices of flipped homes, compared to the rate at which investors were acquiring these properties.
The average ROI on house flips in Q1 of 2023 was 22.5%, which was a little increase from 21.7% in Q4 2023. Along with this, the average gross profit rose to $56,000, from its dip to $53,500 in the fourth quarter of 2022.
Data source: ATTOM Data (2023)
Best States For Flipping Houses In 2023
According to data sourced from ATTOM, the following states are some of the best states for flipping houses in 2023. This is based on the return on investment for house flips in these areas, the availability of suitable properties, and particular metropolitans that are providing the most success for investors.
Pennsylvania has been experiencing a significant demand for housing since 2021, which means that people in the state are choosing to buy property over renting. In 2021, according to the Pennsylvania census, about 69.2% of all properties were owner-occupied, which illustrates this.
ATTOM Data shows that two of the cities with the best return on investment for house flipping in the first quarter of 2023 are Scranton and Pittsburgh, both located within PA. Scranton boasts an ROI rate of a whopping 121.9%, while Pittsburgh follows close on its heels at 109.8%. This, combined with the high demand for homes makes Pennsylvania a great place to begin house flipping.
As the population continues to grow steadily in Michigan over the last 10 years, housing inventory cannot keep up with the demand. Which presents a great opportunity for those who are doing house flipping as home prices increase each year. At the time of writing, according to Zillow’s Home Value Index, the average home value in Michigan has increased by 2.3% over the last year and the average home is valued at $235,361.
The Index shows that 44% of home sales received more than their listing price, homes are selling in just 6 days, and the sale-to-list price ratio is 99.7%. Which indicates a strong seller’s market where sellers are getting the price they have listed their property for, or more. In terms of ROI on house flips, this bodes very well.
The Index also shows that a notable 40.6% of homes were sold below their list price, presenting promising opportunities for astute investors to skillfully negotiate and secure better deals.
Certain metropolitans in Michigan stand out as being ideal hubs for house flipping and Flint is one of these. When it comes to ROI on house flips, Flint boasts a high rate of 94.9%. While Detroit has a rate of 68.6%, as shown by ATTOM Data. Which means that investors should consider Michigan as a house flipping state of choice for 2023.
Louisiana is one of the best states for new real estate investors looking to dip their toes into the house flipping pond. According to ATTOM Data, there is a pent-up demand for housing in the state, as Louisiana has the highest share of mortgages in the country, with at least 25% of these mortgages adding up to more than the property’s value.
At the time of writing, Zillow’s Home Value Index shows that the average home value in Louisiana is $200,370. Which makes this a more affordable state than many others and presents opportunities for real estate investors who are flipping houses.
ATTOM DATA shares two metropolitans in the state that provide particularly good returns on investment for house flipping. These are Shreveport, with an average return of 92%, and New Orleans, with an average return of 84.6%. Louisiana’s house flipping statistics are quite clear that the state has a lot to offer investors.
Worst States For Flipping Houses In 2023
Some states don’t have the best housing market for fix and flips, and it’s quite clear from the house flipping statistics. Let’s take a look at 3 of the worst states for house flipping in 2023 so far.
The Texas real estate market has declined since last year, with home values sitting at $303,971, according to Zillow. This shows a 0.4% decline over the last year, and homes are spending about 14 days on the market. While this may not be the longest amount of time, this, coupled with declining home values and varied performance across the state, Texas is overall not the best state to be flipping homes in 2023.
According to ATTOM data, Austin showed some of the weakest returns on typical home flips in the first quarter of 2023, giving investors a 10.2% loss. The raw profits made from house flipping in Q1 2023 in Austin were also weak, with investors experiencing an average loss of $51,550.
Arizona saw a drastic decline of 39% in home flipping ROI between 2021 and 2022. Since then, the state hasn’t done much better. Phoenix, for example, offered house flippers a 2.4% loss on their returns in the first half of 2023. In 2022, the gross profit for house flipping, according to ATTOM Data was $45,000, which is significantly lower than the national average of $67,900 for that year.
Idaho is not one of the best states to flip houses in, for real estate investing, based on the low average gross profit and average gross ROI. Between 2021 and 2022, Idaho saw the largest drop in ROI on house flipping projects, with a 59% decline. Idaho also had one of the lowest average gross profit amounts, at just $25,550, which was less than half of the national average gross profit and 2023 has not made a drastic difference.
Boise City, Idaho, proved to be the least favorable market for house flipping in 2022, with investors experiencing a meager 2.7% return on their investment. Not much has changed, as Boise earned house flippers a 0.8% loss on average, in the first part of 2023.