Real estate investors continue to be optimistic about fix-and-flip opportunities. While elevated interest rates, rising competition and affordability pressures persist, the resilience of the market — supported by evolving trends and economic shifts — presents exciting opportunities for flippers.
Understanding these dynamics is key for mortgage brokers to help investors succeed. Here’s what they need to know about navigating the fix-and-flip space this year.
Cautious optimism
Investors are approaching the year with cautious optimism, a silver lining reflecting hope for market stability after years of high interest rates and tight housing inventory. Modest wage growth and gradual increases in housing supply are expected to create new opportunities for acquiring and renovating properties, providing relief for all.
There are regional disparities in market sentiment, however. A recent fix-and-flip survey that Kiavi ran with John Burns Real Estate & Consulting highlights softer sales in Texas and Florida, where rising resale supply, homebuilder competition and higher holding costs — particularly insurance premiums — have impacted activity. Conversely, Midwest and Northeast markets continue to outperform, benefiting from lower inventory and less competition.
Natural life events, such as employment relocations and growing families, are also expected to drive inventory growth, offering more opportunities for fix-and-flip projects. Yet the lock-in effect from homeowners resisting selling due to their historically low mortgage rate, remains a hurdle in some regions. Understanding these diverse local dynamics is essential for adapting to the needs of real estate investors, whether it’s providing guidance to first-time flippers navigating their first projects or offering financing for seasoned investors looking to scale their businesses.
Pockets of opportunity
Regional trends will continue to play a pivotal role in the months ahead. Sun Belt markets such as Texas and Florida are normalizing after years of rapid growth. Affordability challenges, rising inventory and higher costs have tempered activity but still offer viable entry points for investors.
Conversely, the Midwest and Northeast regions are booming, with limited inventory and less competition creating favorable conditions. Thoughtful flips, especially those priced at or below the median home price, remain highly attractive to buyers.
In California, the growing popularity of accessory dwelling units (ADUs) highlights opportunities for value-add investments that cater to housing shortages. These units align with local policies encouraging density and offer a strategic avenue for investors targeting affordable housing solutions. Brokers should focus on identifying pockets of opportunity within these regions.
For instance, the Midwest offers lower competition and affordability, while Northeast markets benefit from strong demand for move-in-ready properties. In Sun Belt markets, creative strategies may be required to address challenges while capitalizing on long-term growth potential.
Economic conditions
Economic factors will play a significant role in shaping the fix-and-flip financing environment in 2025. Those include:
- Interest rates. Expected rate cuts by the Federal Reserve could ease borrowing costs, but flippers must remain mindful of carrying costs and overall profitability.
- Competition for acquisitions. Nearly half (46%) of flippers in the Kiavi-John Burns Real Estate & Consulting survey reported greater competition for their target properties than seasonally expected. While this signals a healthy market, it also underscores the importance of brokers helping clients identify well-priced opportunities.
- Renovation spending. Average renovation costs reached $60,000 in third quarter 2024, with kitchens and bathrooms commanding the largest shares of budgets. Brokers should emphasize financing solutions that accommodate these rising costs to attract experienced investors.
Private lenders are a resource for real estate investors by offering financing products such as fix-and-flip, bridge and new construction loans. Additionally, technology is streamlining the fix-and-flip financing process with innovations such as near-instant terms.
Critical guidance
Brokers play a crucial role in guiding investors through the challenges and opportunities of the fix-and-flip market. Here’s how to add value.
First, understand local market conditions and tailor advice to the specific dynamics of the market to help investors navigate challenges like rising inventory or identify under-the-radar opportunities. Second, offer flexible loan products to meet investor needs, from smaller renovation loans to new construction loans for larger projects. Highlight creative solutions to address concerns over higher rates and carrying costs.
First-time flippers need critical guidance, including how to manage risks, calculate profitability and navigate renovation processes. Building trust with first-time investors can foster long-term relationships. Finally, tap into tools that streamline approvals and provide actionable insights for investors. Transparency and speed are essential for securing deals.
The fix-and-flip market offers tremendous potential in the year ahead, but success hinges on adaptability and a deep understanding of market trends. Brokers who stay informed about market dynamics, offer innovative financing solutions, and empower clients with actionable insights will be well-equipped to thrive.
While elevated rates and affordability pressures persist, the resilience of the market and investor optimism point to a promising future. With thoughtful planning and strong partnerships, brokers and investors alike can make this a year of growth and success.
