Home flipping profits shrink to their slimmest since 2008

Real estate flips produced their smallest profit margins in well over a decade during the third quarter as rising home prices require a change in strategy for investor businesses, according to a report from Attom. 

Real estate investors flipped a total of 72,217 properties between July and September this year. The number finished 9% below the previous quarter's 79,335 and decreased 4.9% from 75,977 over the same period in 2024. 

Diminishing volume corresponded to slimmer profits, with the typical margin on flips at 23.1% in the third quarter, compared to 26.5% and 29.8% three months and one year earlier. 

The third-quarter margin was the smallest since 2008, according to the real estate data provider. 

"Rising home prices and shrinking margins have made flipping increasingly challenging," Attom CEO Rob Barber said in a press release. "What was once a flipping market that consistently delivered 40-to-60% returns for more than a decade beginning in 2009 has now settled into five straight quarters of returns in the 20% range."

The margin falloff reflects dropping gross profits, which exclude any investor renovation costs and mortgage and tax payments. These came in at $60,000 based on median sales prices. The figure was down from approximately $68,000 three months earlier and $73,600 year over year. 

The share of flips turning into purchases also shrank to 6.8% of total home sales in the most recent quarter. The share contracted from 7.3% in the second quarter and 7% one year prior. 

With demand and return on investment trending lower, "investors must choose their markets more carefully as the game has fundamentally changed," Barber added. 

How some of the largest markets performed

Evidence of how fortunes might diverge showed up in market breakdowns. Across the country, only 40 of 182 metropolitan areas tracked by Attom recorded home-flip profit margins exceeding 50% in the third quarter. 

Among markets with 1 million residents or more, Pittsburgh and Buffalo, New York, earned fix-and-flip property investors the best ROI with typical margins of 103.6% and 94.1%, respectively. The two Northeastern cities were followed by Memphis, Tennessee, where investors saw a 75% yield, New Orleans at 72.4% and Richmond, Virginia with 72.2%.

On the opposite end, four large Texas cities landed at the bottom with the thinnest profit margins. Investors in Austin garnered just a 4.1% return on flipped units, with Dallas not far ahead at 4.6%. Houston and San Antonio came in with typical profit margins of 5.1% and 6.5%.   

Lowest-priced properties resulted in investor losses

The poorest returns for fix-and-flip homes corresponded to the most affordable properties first purchased by investors, according to Attom. Homes originally sold to investors for $50,000 or less ended up costing them in the form of an approximately 14% loss, or $5,000, when flipped in the July-to-September time frame.

Federal Housing Administration-backed mortgages, which have loan amounts capped and are often favored by first-time buyers for the most affordable units, were used in 10.6% of flipped transactions.   

The highest yields came from homes initially purchased in the $100,000-to-$300,000 range, which resulted in a profit margin of 31%. Properties priced above $5 million also ended in a 28% gain for investors. 

All-cash purchases of homes finished the most recent quarter with a 62.9% share of flipped volume. The portion increased from 62.2% in the second quarter but slid from the 63.4% share from 12 months earlier.