Investors See Average Return on Investment Down Amid Tight Market plus Labor and Supply Shortages
By Stephanie Mojica no longer afford real estate in their own cities , so they look to Baltimore for affordable real estate . However , Green said outoftowners are more prone to make notsogreat buying decisions .
' Investors come in and think it is easy to buy because the houses seem cheap — they ' ll think buying a shell ( of a house ) for $ 40,000 is a deal ,' she told CNN . ' But I know that ' s not the best neighborhood . You have to know the market and understand what you ' re buying .'
Image by F . Muhammad from Pixabay
Flipping homes became so popular it inspired countless reality shows , real estate coaches , and speakers . However , according to some investors flipping homes is now less profitable than ever .
The number of people buying fixerupper houses at low rates , fixing them up , and then selling them for profit has dramatically increased . But that isn ’ t necessarily the problem — the ongoing housing shortage is the main issue , according to a recent housing report on CNN .
Even homes in dilapidated condition are selling at skyhigh prices . Another challenge for wouldbe real estate flippers is the increased cost of supplies and labor shortages .
The proof is in the data . The average return on investment was 32.3 % or
$ 68,847 , according to Attom ( an official data provider for the real estate industry ). Things haven ’ t been this bad for house flippers since 2011 .
However , investors interviewed during the broadcast are making it work — and not all are angry about the 32.3 % ROI . Danielle Green of Baltimore has flipped houses since 2018 . Before COVID19 , Green went to auctions and bought properties for $ 5,000 to $ 10,000 . Now she pays $ 20,000 to $ 40,000 — a 400 % increase .
One of Green ’ s challenges is that auctions are held online rather than in person , dramatically increasing the number of competing bidders . Also , fewer auctions were held due to a lack of available properties .
Another issue is that people from larger metropolitan areas such as Washington D . C . and Philadelphia can
Green changed her strategy and started buying multifamily homes with three or four units as opposed to singlefamily properties . Instead of selling immediately , she kept some of her properties to use for ongoing rental income . Now , she does one to two “ big deals ” a year as opposed to three or four . However , Green said it ’ s still profitable for her .
Leah Wensink of Harrogate , Tenn . ( about 60 miles from Knoxville ) has been a real estate flipper since 2014 and paid $ 170,000 cash for a house to flip this year — her highest investment ever , according to the broadcast . Wensink ’ s project was delayed by a few months by supply and labor shortages and is also unsure if she ’ ll see a significant profit on the property .
Her philosophy , which sounds like a solid one for other investors , is to set a firm boundary about how much money she will spend on a deal and do a lot of research on her market .
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