Market Trends and Their Impact on Fix and Flip Investments

Market Trends and Their Impact on Fix and Flip Investments

The fix and flip method is a great way for both experienced and new investors to achieve sizeable returns from real estate. In today’s high interest rate environment, it can also be a preferable strategy to long-term rental investing. By identifying key markets and real estate opportunities in those markets, you can learn how to maximize your return. Making use of real estate data and taking the time to understand today’s market trends also allows you to make smarter investment decisions. Continue reading as we cover the market trends to be aware of and their impact on fix and flip investments.

Businessman showing real estate growth and graph double exposure

Interest Rates

You almost can’t talk about today’s real estate market without mentioning interest rates. Higher interest rates mean the cost of financing is more difficult to justify in many situations, and when combined with high property values due to low inventory, it can make for low sales numbers in certain markets. Conversely, if you can identify markets with a healthy amount of sales activity, it can be an indicator of good opportunities in home flipping.

High interest rates also have an effect on long-term rental investments as they eat into net returns, and more investors are turning to flipping as a result. Be prepared to encounter more competition in your market from an increased number of home flippers.

Housing Supply and Demand

We already mentioned how low inventory is a problem in many of today’s real estate markets. Buyer demand often exceeds supply in most areas, which leads to inflated home prices. This can also have an effect on buying properties for flipping, making it harder to find good deals on homes. It can serve a benefit on the selling side, however. You should also take seasonal trends into account, like slower purchasing activity in the winter which can affect your final sale price.

Economic Factors Affecting the Market

There are a few other economic factors to be aware of which can affect markets on both national and local scales. Despite higher inflation numbers, employment rates and GDP growth have been healthy in certain markets which fuel purchasing activity. Obtaining accurate information for these key data points is crucial to making better investment decisions. We recommend trusted resources like ATTOM Data and REiDEAL MASTER as a few leading data providers.

Regional Market Analysis

Utilizing the data you have gathered is the best way to identify profitable markets and opportunities within them. Hot markets include those that are experiencing significant growth, a healthy job market, or high sales activity. Identifying one of these up-and-coming markets is the first step to finding a good fix and flip deal. Then, you should search for older or neglected properties located in high-demand areas, as these will have the most room for improvement and value add potential.

Popular Renovation Trends

Making use of popular design trends helps boost demand for your property and maximizes your return on investment. Try to incorporate modern trends like open-concept design, and smart technology in the form of doorbell cameras, locks, and thermostats. Eco-friendly and energy efficient renovations are also increasing in popularity. These upgrades help add value to the home and can also become marketable selling points in the property listing.

Legislative and Regulatory Risks

There are also legal, regulatory, and zoning restrictions to consider if you plan to make significant renovations to a property. First, ensure that you have all permits in place with your local jurisdiction before starting any work. Then, hire trustworthy contractors that you know are fully licensed and will perform work that is up to code. You don’t want to start a project that you will only be forced to change later. Preparation and research are the best way to avoid legal complications with your investment.

Buyer Preferences and Demographics

Understanding buyer preferences will allow you to tailor your investment strategy to them and maximize demand. Getting good data on the demographics of a market can also help you get a better understanding of their preferences. For example, in a market with many new, younger families being formed, homes in quiet neighborhoods that have access to quality schools will be higher in demand. Take the time to do some demographic research as it can lead to considerable gains for your investment.

Strategies for Adapting to Market Trends

We want to end with some practical advice for how to adapt to changing trends in the real estate market. First and foremost, you should try to be flexible with your approach, and be prepared to pivot your strategy if the market demands it. Staying up to date on market trends and quickly reacting to them is the best way to put them to your advantage. On top of this, you should build a network of trusted industry professionals and regularly attend events so you can keep an ear to the ground on the latest trends.

RCN Capital

The easiest way to save on your next investment is to obtain financing from a real estate lender that can get you the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors. If you are looking to finance a fix and flip project, RCN Capital has competitive loan options available.