Fix and Flip Trends 2023
Fix and Flip Trends 2023
2021 and 2022 were particularly great years for flipping houses but have the tables turned? We’re facing higher interest rates, inflation, and a possible recession, making things look a little bit grimmer in 2023. However, there are still plenty of opportunities for fix and flip investors in the year ahead. Here’s what the experts want you to know.
2023 may see tighter profit margins for fix and flip investors
Unfortunately, a number of factors could lead to smaller profit margins in 2023. This includes:
Increased cost of construction materials. Over the past few years, we saw a huge increase in the cost of construction materials. Though these have started to decline – particularly the costs of lumber – prices remain elevated, adding to the costs involved in renovation and rehab projects.
Lower inventory and higher prices. Increasing mortgage rates and higher house prices mean people are reluctant to sell, and therefore there are less opportunities to purchase fixer upper properties. It also means it is harder to find properties with the potential to net a decent profit.
Despite this not-so-sunny outlook, with careful planning, the right purchase and a cost-effective fix and flip loan, you can still see yourself making a profit from flipping property this year. Choosing the right loan and planning ahead can maximize your investment and ensure flipping property is worth your while.
Foreclosure levels will continue rise
According to ATTOM, foreclosure filings increased 64% by the end of 2022, with the States of Texas, California and Florida hit the hardest. With a recession on the horizon, unemployment will likely increase and therefore foreclosure rates will continue to rise. For fix and flippers, this could lead to more inventory to choose from. However, investing in foreclosed properties is complex and only recommended for seasoned investors with a strong understanding of the process.
Rental prices will continue to increase
With rising house prices and increasing mortgage rates, many prospective homebuyers are choosing to rent instead. This has resulted in increasing rental prices, which are predicted to carry on rising. This means 2023 could be a great time to employ the BRRRR method. BRRRR (Buy, Rehab, Rent, Refinance, Repeat) involves purchasing and rehabilitating a distressed property, then renting it out and refinancing to start the process again with another property. With increased rental prices, this method may see a huge influx of passive income and the ability to carry on investing without a huge outlay of capital.
Technology will continue to open doors for fix and flip investors.
There are many ways technology is making it easier for fix and flip investors to find opportunities for a successful investment. For example, technology means you can view and inspect properties online, allowing you to search for deals across the country without ever leaving your home. Technology also means the process is much faster with reduced paperwork and processing times, allowing you to snap up a deal quickly.
So how can you make the most of fix and flipping in 2023?
Do your research. Markets vary widely across the country, as do the costs involved in flipping a home. Make sure you do your research, shop around and have a solid understanding of the market you’re investing in – and the costs you’ll incur along the way.
Choose the right lender. Not all fix-and-flip lenders are the same and it’s important to partner with someone who understands your goals and can work with you to achieve them.
If you’re ready to make a move in the fix and flip investment market, get in touch with RehabLend today. We can help with a cost-effective rehab loan tailored to your strategy and designed to optimize your investment.
This article is intended as a general guide and should not be considered as advice.