Is Now a Good Time to Flip Houses?

Is now a good time to flip houses? It could be the best of times, or the worst of times, depending on how you do it! There are plenty of opportunities out there right now, but there are a lot of major pitfalls too. In this video, you’ll discover how you can make it a great time to be a house flipper AND how you could make it an awful time, if you’re not careful.

3 Factors of House Flipping Success

There are 3 fundamental factors that dictate whether it’s the best of times or worst of times for you to flip houses right now.

Factor #1:  Inventory Level

The first is inventory level and this is the most important factor!

High Inventory: When there are a lot of houses for sale in the same area of similar size, construction, and quality, you have what we call a high inventory level. High inventory means lots of competitive houses for sale and that makes it harder to flip your house quick, because buyers have so many options to choose from.

Low Inventory: But when there are very few homes for sale on the market that are similar to yours, that’s a low inventory level, and that is extremely good for house flipping. So, to make now a good time to flip houses, you need to do deals on properties that have low inventory levels. This can vary dramatically, even in the same city or zip code. If you find yourself saying, “There’s nothing else in the area like this deal on the market right now,” then you’re on the right track.

Factor #2:  Demand

The second fundamental factor is demand. Just because there may be no inventory for houses like the one you want to flip at the time you buy it, doesn’t mean similar homes couldn’t hit the market as soon as you close. But how do you know what the inventory level will be in a few weeks or even months? That’s where demand comes in. It is the factor that drives inventory levels and is essential for helping predict the short-term future of inventory levels.

Drivers of Demand

Desirability: Demand is driven by the desirability of a neighborhood and affordability relative to the income of the pool of buyers. Desirability is self-explanatory. Just imagine where you want to live and raise your family, in a given region and that’s about the same as everyone else.

Affordability: Affordability relative to the income of the pool of buyers is driven by interest rates. Interest rates have been above 6.5% for quite some time now. Many of you may remember a time when rates were in the 3s. As rates climbed, what it essentially did to house buying was drive prospective buyers to buy smaller homes or in less desirable areas. This is because most people haven’t dramatically improved their debt-to-income ratio in the past few years. They aren’t making more money and may have more debt payments as well. So, if they want to be a homeowner, they can afford less home than when the rates were at 3% and 4%.

What this means to house flippers is that the vast majority of demand is in the most affordable homes that are in decent neighborhoods. That’s where you have the most prospective home buyers actively searching. Sure, there may be affordable homes in a very dangerous and crime ridden part of town, but the sweet spot is affordable and safe.

What is Affordable?

Anything at or below the median house value for that zip code. You can determine the median sales price by zip code on Zillow using these simple steps:

• Click on "Sell" in the upper left corner and then "Home Values" on the drop down menu.
• Enter the zip code of the area. As an example we’ll use Orlando: 32812.
• The average Home Value for 32812 is $395,854; but scroll down the page, and you’ll see the median sale price, which is $346,750.

You want to work below that number, aimed at middle class households. Upper middle class, well above the median price, is a ghost town right now. Very few buyers can afford those homes. So, you want to focus on the high demand deals that have values below the median sales price, and are located in at least a decent area.

Factor #3: Speed

The third fundamental factor that will dictate whether it’s the best of times or worst of times for house flipping, is speed. You can embark on a house flip for a deal with a low inventory level and in high demand, but still fail miserably if you move slow.

The faster you do the deal, the better. The longer you drag it out, the worse things will be. We have created some of our industry’s most iconic video trainings on this subject, going all the way back to 2009. The now famous Secret to Flipping Houses video that Phil created, still stands out as a foundational teaching on the subject. In that training you’ll discover that taking on a long and drawn-out renovation project, like you see on HGTV, is a recipe for disaster. The key is to get in and get out as fast as humanly possible.

And if you missed it, a few weeks ago, I posted my training 3 Mistakes that Ruin Profits on House Flips which outlines 3 common situations that either slow down a house flip or can wreck any potential for profits before you get started. Make sure you check that out too.

How Do You Find Low Inventory, High Demand Deals?

To make right now the best of times with house flipping, you need to concentrate on deals with low inventory levels, that are in high demand, and you need to do deals extremely quickly. If you want to make it the worst of times, do deals with high inventory levels, that are in low demand, and let the deal drag out for months and months. But how do you find low inventory deals in high demand before the competition? How do you do deals extremely quickly and not get stuck in long, drawn-out rehabs? That’s what we do at Freedom Mentor! We mentor, coach, and transform people into world class house flipping professionals.

Every Successful Real Estate Investor Has a Mentor

If you want the very best in your corner, helping you every step of the way, consider applying to our Apprentice Program where myself, Phil, Devin and the rest of our team will guide and train you through this incredibly profitable endeavor of flipping houses. Text FREEDOM to 305-315-8030 or apply to our Apprentice Program here: Freedom Mentor Apprentice Program.