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Maximizing Profit When Flipping A House

by Eric Rothman
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According to a new study, there’s a good chance you or someone you know has flipped a house in the last year. Attom Data Solutions recently released their yearly Home Flipping Report showing that over 207,000 homes were flipped in the US in 2017, the most in 11 years.

The total number of companies or individuals who flipped a property last year also increased to 138,000 – also a decade high. But, are these new flippers maximizing the profit in their investment property?

Shrinking Margins

Couple reviewing expenses

Given the increase in activity, it seems fair to assume that there is great money to be made in flipping homes. That may be true, but with an increase in home prices, the margins are getting slimmer.

The gross margin on a flip last year was down slightly to 49%, with flippers seeing an average profit of $68,000 per home. Investors try to squeeze every penny they can out of their property, and one way to add to the bottom line is to pay less in real estate agent commissions.

Let’s look at an example of how flippers can generate tens of thousands of dollars more in profit simply by choosing the right real estate agent…

Meet “Flipper A”:

  • Flipper A buys an investment property for $400,000
  • Some updates need to be made before putting it back on the market, totaling $50,000
  • With $450,000 invested already, Flipper A wants to sell the home for $525,000 and make $75,000 in profit
REX Agent meeting potential buyers

Now, Flipper A has a decision to make. By choosing to sell the home through a traditional agent, Flipper A will be giving up 6% of the total sale price in agent commissions. That’s a big chunk of dough. On that $525,000 list price, $31,500 goes to the agent. That means, Flipper A nets $43,500…not the $75,000 they had hoped for.

But, what if Flipper A had chosen REX? As the only full-service real estate agency that bypasses the Multiple Listing Service (or MLS) and uses AI, machine learning, and big data to sell homes, REX seller fees are as low as 2% total. With REX, Flipper A only pays $10,500 in fees and nets a whopping $64,500.

For investors looking to maximize profit in their flips, it’s a no brainer.

Are you an investor who wants to ensure they’re getting the most out of their flips? Sell with REX!

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