Flipping and the Market Shift

[Maria Cox]

As a flipper, how are you adjusting your strategy with the market shifting? 

#investinginthetriangle #rdu #raleigh #durham #chapelhill #cary #northcarolina

[Andy Sabisch]

Being careful about the projected ARV on any project.  The last few years your ARV would typically be higher than the initial expectation based on the way the market was feeding on itself.  As interest rates rise, the buyer pool shrinks which holds prices or drives them down . . . moving to a buyer market which will impact what people can get for flips.

We have seen a slow down on properties selling but people are still paying top dollars for flip homes.  I can see many being left holding the bag so to speak when their ARV is less than expected and the reno costs are more than expected with prices of material staying high or going higher.  There is a house in our neighborhood that is a flip that the team fell short in my eyes with what they did and the house has sat on the market for 100+ days.  I talked to them a week or so ago and they are stuck with being able to come down much more than they have (dropped $15K since listing) yet they have the carrying costs . . . recommended they sell and take a loss if needed but they are holding out for money they need to make a profit . . . this may become more common as the buying pace slows.

The cost of materials has not really come back down and if the market slows, sellers that are willing to take what is needed for a flip will be fewer.  We have seen that buying rentals is a market we are focusing on since buyers that are no longer in the market due to interest rates need a place to stay and rentals will hold value in this market.