As costs climb and margins melt, the golden era of home flipping has turned into a grind.
Profits for home flippers slid further in the third quarter as a “perfect storm” of challenges mount for that segment of the home investor market, experts tell Scotsman Guide.
Typical flipped-home sales yielded a return on investment of 23.1% in the third quarter. That is below levels seen during the 2008 financial crisis and is down from 26.5% in the previous quarter and nearly 30% over the same period last year.
Home prices, elevated input costs and difficult resale conditions are putting a “triple squeeze” on flippers that is “arguably more punishing than the crash of 2008,” says Kyle Concannon, vice president of product for Constructive Capital, a wholesale lender of short-term residential transition loans (RTLs) used to finance renovation-and-resale projects, also known as “fix-and-flips.”
The broader recalibration of the post-pandemic housing market has turned the screws on fix-and-flippers, many of whom now earn reduced profits of half to one-third what they earned just six or seven years ago.
Fundamental changes
Multiple years of double-digit home price gains have yielded to widespread softening in markets across the U.S., a trend that is likely to persist through 2026, at least.
That rapid price appreciation dramatically increased the baseline price at which flippers acquire properties they deem ripe for renovation. But softening resale prices on the other side of the deal have shrunk the pool of potential gross profits, before factoring in rising repair costs and cautious buyer behavior.
“Holding costs are eating alive whatever margin is left.”
Flippers are getting stuck holding finished projects on their books, at which point “the clock becomes the investor’s worst enemy,” says Concannon. “Holding costs are eating alive whatever margin is left,” he adds.
Flippers purchased properties for a median price of $260,000 in the third quarter, and sold at a median price of around $320,000, according to figures published Thursday in a quarterly report on home-flipping trends compiled by Attom, a real estate market analytics firm.
Gross profits of $60,000 in the third quarter were down from $68,000 the prior quarter and around $73,000 a year ago. With the pace of overall home sales remaining near historical lows in 2025, flipped homes as a portion of total home sales fell to 6.8% in the third quarter from 7.3% in the second quarter and 7% a year ago.
Even more than a dip in mortgage rates, Concannon says “a thawing of inventory that forces acquisition prices down” is the most vital development that could boost the RTL space in 2026, “giving investors a healthier spread at the time of purchase.”
Borrowing costs have remained more than double their pandemic-era lows over the past two years, and housing economists predict they will stay elevated next year, meaning financing for flippers is unlikely to be the dam that breaks.
Adjusting expectations
Over the decade before the pandemic, many flippers simply grew accustomed to fatter margins.
“What was once a flipping market that consistently delivered 40% to 60% returns for more than a decade beginning in 2009 has now settled into five straight quarters of returns in the 20% range,” said Rob Barber, CEO of Attom, in the company’s report.
Flippers must “choose their markets more carefully as the game has fundamentally changed,” he added.
In fact, current conditions have pushed some flippers to forgo the game altogether, with many reporting adjusting investment strategies to include rentals — or altogether switching to rentals.
Commonly financed with debt-service coverage ratio (DSCR) loans, rental investors have maintained strong purchase performance in 2025 amid rising renter rates and strong demand from capital markets. Non-qualifying mortgage (non-QM) issuance has similarly surged in 2025, with about half of that volume driven by DSCR, business-purpose originations.
Roughly 30% of total home sales went to residential real estate investors through the first six months of 2025, with overall purchases exceeding 100,000 units in May, June and July, on par with the elevated purchase volumes of investors during the pandemic.
Selma Hepp, chief economist at real estate analytics firm Cotality, recently told Scotsman Guide, “Longer term, I don’t think we are going to see a significant change or slowdown in investor activity.”
Expanding inventory over the course of the year has led to steeper price softening in the South and West regions than the Northeast and Midwest. Cotality reported last week that overall price declines in six of the largest U.S. metro areas in January had spread to 32 of the largest markets by October.
Shifting exit strategies
Formerly hot markets that are now “flattening out” have left “fewer opportunities for investors to buy, renovate and sell at the returns they’ve grown accustomed to,” says Jeff Tesch, CEO of investor-lender RCN Capital.
About one-third of respondents to a quarterly survey his company conducts cited Trump administration immigration and tariff policies as adding insult to earnings-injury, eroding their margins further by increasing labor and material costs.
Tesch tells Scotsman Guide that fix-and-flippers intent on staying in the sector “should double down on their market-level due diligence.” Projections for expanding inventory next year will mean “acquisition prices soften in pockets across the country,” he says, but “lower purchase prices don’t automatically translate to stronger returns.”
That warning registers in Attom’s third-quarter data. For all the talk of lower acquisition prices, the cheapest homes purchased by flippers (less than $50,000) generated an average negative return on investment of 14%. Homes acquired for between $100,000 and $200,000 provided the strongest returns, at 31%.
“Flippers will have to be sharp to identify which opportunities pencil out,” adds Tesch, noting that in the current market “it’s smart to structure deals that work both as a buy-fix-sell and a buy-fix-hold,” transitioning the flipped-home sale to a rental property.
That strategy, says Constructive Capital’s Concannon, is an attractive option for investors dodging mounting losses.
“Investors are increasingly pivoting the property to a DSCR rental-loan exit or skipping the flip completely and looking to develop new construction properties,” he says.
