3 Lies the Media Will Tell You About Flipping Houses

3 Lies the Media Will Tell You About Flipping Houses

Lately, I’ve been seeing some very frustrating headlines in the media and they have to do with one of my favorite real estate investing strategies: flipping houses.

You might think that makes me excited, but it actually kind of frustrates me. These headlines are not positive. In fact, they’re downright negative.

Now, I don’t mind when the headlines are negative because the news is legitimately bad, but what I do mind is when the headlines look negative and do not tell the whole story. When that happens, investors have trouble making good decisions about how to use their capital, and that is not fair.

Here are three lies the media is presently telling you about flipping houses and, with them, the “rest of the story,” so to speak:

1. You can’t make enough money anymore flipping houses

In fact, flippers are making great money in a lot of markets! This “lie” comes out of a truth: Return on investment (ROI) is down for flippers in 2019. According to a report from ATTOM Data, flippers’ grow ROI fell from 41.1 percent in Q2 2019 to 40.6 percent in the third quarter of the year. Furthermore, it was down from 43.5 percent a year earlier.

What the news stories that focus just on falling ROI leave out is that flipping profits and flipping gross returns are two entirely different things. You might have huge gross returns without having any net positive productivity, and you might have much lower gross returns but have really great net returns, depending on your strategies for acquisition and renovation. To simply say “Flippers are making less money,” based on national numbers that focus only on gross (total before subtracting costs) returns is very misleading.

Lesson Learned:
Check the numbers with your personal flipping company before assuming a national headline is correct.

2. There are no more houses to flip

Speaking of ATTOM Data’s data being used for misleading headlines, another problematic use of their information (which is really fantastic in raw form and in reports, by the way!) occurs when media outlets state that there are basically no more houses to flip and cite ATTOM Data’s information stating that 6.8 percent fewer homes were flipped in Q3 2019 than a year prior.

While this is definitely indicative of fewer homes being flipped, it definitely does not mean the window to flip houses has closed! Nationally, more than 200,000 were flipped in 2019. You just have to know how to find and acquire good properties at good prices, then renovate and market them to sell at the right price. If there are fewer homes being flipped nationally, it may actually be a good thing because it means fewer flippers with no experience are jumping into the game.

Lesson Learned:
Fewer people flipping is not necessarily bad news for your flipping as long as you are acquiring, renovating, and reselling wisely.

3. The “good markets” are closed for business

When you read a headline like this one, “Home Flipping is Flopping,” it is tempting to believe that the “good markets” are all gone and there are no more chances to flip for huge profits. However, it turns out this is just another “twist” on the ATTOM Data information that really is not all that bad for flippers! At least in that specific article, the author explored the report a little farther than other journalists did. They concluded, “It’s not bad news for everyone. Home flippers in the following five markets are doubling their money.” They went on to list a variety of markets in the Midwest and Southeast that are still turning over great profits for real estate investors.

Lesson Learned:
Flipping houses can still generate great returns as long as flippers are operating in the right markets.

Due Diligence is Important Everywhere

I might seem like I come down really hard on the news media, but really, I’m coming down just as hard on investors who do not do their own research and get all the facts as I am journalists. After all, it’s hard to be a reporter.

A lot of times you are reporting on topics in which you are not an expert, and that is difficult! However, real estate investors are responsible for being experts in their field or at least for working with people who are experts at using their preferred strategies in their preferred markets. That is why Strategic is dedicated to ongoing market research and strategic evaluation to make sure that at all times, our data and our firsthand experience and information is the very best.