Utah flipping market is flipping the script on real estate

MURRAY, Utah (ABC4) — House-flipping activity in Utah has declined since the COVID-19 pandemic, according to Utah real estate agents. Experts say flipping is still common in Utah, but it’s less profitable than years before because costs are up, competition is higher and buyers are pickier. 

London and Chase Lima are switching up their house flipping strategy.

“Right now, is not a sellers’ market so if you are flipping to just flip and get out, you can lose cash that way,” London said.

For the past four years the couple has flipped three houses, now they are in one while they renovate. 

“Our strategy is to find it under market value, or completely off market, like this one we found off market, and then we buy it, and every time we’ve walked in with quite a bit of equity,” the Limas said.

They said that flipping houses — buying, renovating and selling — is not as profitable as it used to be.

“The properties that we have bought, we have kept long term, so not only are we walking in with the equity, we then remodel and get it appraised to then have more equity in the home, and then are able to charge a higher price, we’re able to rent for a good amount. Our goal is to hold on to it long term, because then you’re never going to lose money and it’s still a flip,” Lima said. 

According to ATTOM nearly 8.5 % of homes sales in Utah. ATTOM says the average gross profit has dropped from $51,265 to $27,629 from a year ago.

“During the pandemic, supply was really low, so flippers had a hard time getting the values they needed in order to flip the home, and the cost escalated during COVID, because the government bailouts caused inflation and that inflation increased the cost of materials and those two variables squashed the flipping market,” Thomas Wright, CEO of Sotheby’s International Realty said.

Wright said that the biggest challenges for flipping today are buying at the right price, managing renovation and holding costs and accurately predicting the home’s resale value. 

“You need to make sure you’re buying it correctly, that you have the ability to turn the property quickly so that the carrying costs don’t eat up your margin and that you’ve calculated your costs correctly,” Wright said.

Now, the Lima’s are encouraging others to think smartly before investing in flipping houses.

“Real estate doubles every fifteen years so if we can hold on to our houses without losing that much money that would be awesome,” Chase said.

There’s more than one way to invest in real estate. Flipping is just one option, Wright said that a smart alternative is buying a multifamily property like a duplex or triplex, live in one unit and rent out the others.