Flippers Are Feeling Most Bullish in Months, Here’s Why

0:00Flippers are reporting lower profit margins, but at the same time, a recent survey tells us that they are just as optimistic about flipping as ever. So which one is it? Is it a good flipping market or not? Today, we're bringing on our house flipping expert, maybe one of the greatest house flippers of all time, James Dainard, to give us the real state of the flipping market in 2026.

0:30Hey, everyone. Welcome to On the Market. I'm Dave Meyer here with James Dayner today to talk about the state of the house flipping market. James, what's up, man? Thanks for being here. Oh, I'm in sunny Arizona this week. I know. You just look warm. You're glowing right now with warmth and good weather. Well, thanks for joining us today. I know you're busy being a TV star and flipping 10 ,000 houses and all that other stuff that you do. But I was reading this article the other day. It is called What to Expect from the Home Flipping Market in 2026 and Beyond. It's a survey that Resi Club put together.

1:12And as I was reading this, I was just thinking, got to talk to James about this. I'm very curious what he thinks about it. So if you're cool with it, we'll just walk through this report. And I just love your takes on how the overall flipping market is shaping up in 2026. I love making predictions that probably won't come true. So we'll see how it goes in 12 months. All right. Well, I think the headline is that flippers, they're just pretty optimistic people, maybe, or at least compared to me, because the survey that we're talking about, people are asking, how is flipping right now? Is it working in today's market?

1:55and people are kind of saying yes. Like over 50 % said that their market is either strong or very strong. 40 % said somewhat weak, but only 8 % said very weak. And that's actually down from six months ago and one year ago. Now I am not a flipper. You and I have done a couple little projects together, but man, when I look at that, I'm like, what are they seeing that I am not seeing? Well, I think it's just the natural being high risk investor, right? Like whether it's flipping crypto, you have to believe in it. Yeah. I mean, to take that kind of risk on, right? There's a lot of reward in flipping, but there's a lot of risk.

2:37If you have that kind of cautious, like, I don't know, you just never buy a deal, right? And you get into analysis per house and you lock up. But I do think this rapport, people are extra optimistic. Like the weird thing is I'm kind of a pessimistic flipper. because I still have 2008 scars where I'm like, everything was sunshine and bunnies. And then all of a sudden it was not sunshine and bunnies anymore. But according to this article, people feel really strong about it. And, you know, I think I feel like our economy for the next couple of years is going to be kind of this like volatile up and down.

3:11And this flipping is really going to come into timing. Maybe tell me, you seem a little bit pessimistic. Like, what are some of the conditions as a flipper you're seeing on the ground that's making you not feel great? about the market? It's stability and showings and buyer sentiment that gives me the most concern because I feel like people are so much more finicky nowadays. They don't have the same outlook as flippers have where they're like, we got to get in the housing market. It seems like any little jolt to the economy or move geopolitical or even just every time Powell speaks, it's just like buyers lock up.

3:49They either fall in love or they pull back. and I would say there's sediments all over the place. And just based on the consistency of data, right? Like we're seeing showings, inventory is going up and down, up and down. There's no consistency. And that's what makes me feel a little bit concerned. So it's less about your own operations, right? Like you're not as worried about doing the renovation costs of inputs, what you can buy them for. You're worried mostly on the disposition side when you actually have to go and sell what you flipped? I guess that's the problem with flipping right now. I'm a big proponent of creating systems, discipline, and following that path.

4:29And sometimes you're gonna sell at the right time, sometimes you're gonna sell at the wrong, but you can keep that discipline through and just try to stick to the format. The format's a lot harder to stick to now. Hiring contractors in the labor market is still all over the place. It's hard to find people. Any kind of excuse to the economy, contractors use. and it's not their fault. They're just trying to make money. And also they have valid concerns right now. Gas is really high. We're having guys not come. They don't even want to bid houses because like, you know, it's just a little too far.

4:58Really? Wow. I just had a house out in Snohomish, which is about 45 minutes north of Seattle. It's a little far. Beautiful country, 10 acres. I don't, I don't, there might've been a murder there. I don't know, but it's a, don't ask questions on that one. But getting an electrician to work out there, we have been bidding it for three weeks we had a quote come in at 69 000 on this house and we just finally contracted it at 28 000 oh my god and the guys are we've used them before it's just like that's how much he didn't want the work because it was too far away it's like the gas the time i got to go up there a bunch and he just didn't want it and so that's the hard part is like being consistent because usually i can look at a house it's a 3 500 square foot house and go it's about eight to ten dollars a foot to rewire that house but fuel and the economy it does make a big impact and what i am seeing is because buyers and flippers are still being aggressive and they're still seeing a good market and a good outlook they're still buying so people still have a lot of work in in the hopper and so finding guys is really really challenging and so is finding like the tariff the tariffs have not burned off on a lot items appliances are still really expensive I mean, we're talking cabinets.

6:13Cabinets are high right now. Countertops are high. Yeah, so it just kind of feels like you're getting hit all over the place, right? You're not able to feel confident that you're going to have a strong buyer pool, right? Because it just feels week to week right now. You know, since the war in Iran started, interest rates went up. We're already seeing pending sales go down. Like, there's already a measurable impact to that. AI displacement, people are super worried about that. But then, you know, who knows? Maybe the stock market keeps going up and then people start feeling good. So on the disposition side, you're getting hit.

6:48Then on the input costs, just for materials, you're getting hit. Labor costs, you're getting hit. I guess the only way I could see flipping being better is that you're getting better deals, right? You have to be paying much less than you were to compensate for those challenges. Are you seeing that at least? No. Not right now, but that's normal though. Oh, because it's spring. It's just spring, right? I would say the market was doing very well, at least in our market. I was even seeing it down in Arizona. Sales were popping off. I've talked to some other flippers nationwide. It was kind of moving until this war kind of kicked into place.

7:28And we were seeing low inventory, but you have everybody coming off a win. So anybody who sold in December, January, and February, you're feeling good because the house sold quickly. Like everything I listed in January, February, we sold within the first 10 days. Well, that's when we were like touching 6 % mortgage rates. 6 % mortgage rate, time of season. And then how long did our flip take? Just something absurdly long. Oh, the one in West Seattle? Yeah, yeah. That one took six months almost. I feel like we were watching paint dry. And that's the dangerous part about flipping. You always got to remind yourself of is, you know, you want to go buy something when you just hit a win.

8:03You just feel good. You feel invincible. Like I just crushed this deal and everyone said the market was garbage six months ago. They're getting more aggressive now and this is where you get in trouble because then you're going to sell in the summer. We have a lot of volatility going on and that's where it can hurt, but I'm not seeing a lot of deal flow. But partly is we've redefined what a deal is right now because we feel like the market is a little bit more volatile. If we're buying right now, we're going to be selling in a slower time. We want a wider margin. And because we've increased our margin expectations, it is harder to find a deal.

8:34If I put it down to what we were buying at 12 months ago, we probably would have an extra four or five deals this month. Well, I want to talk a little bit more about that, that margin component, because I do think that's how you can still be a flipper, even in what James is describing as a tough flipping market. But we got to take a quick break. We'll be right back. There are two kinds of real estate investors, those who have reviewed their insurance and those who think that they have. Most don't realize their coverage wasn't built for how they actually invest. vacancy periods, rehabs, short-term rentals, or LLC-held properties.

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11:04Welcome back to On the Market. James and I are talking about flipper sentiment and what he's seeing in his market. Let's jump back in. I just wanted to talk a little bit for a second and share some information from this report about the regional variances, because my assumption going into reading this article was, oh, you know, people in the West where you and I both live and where you flip are going to be negative. People in the Northeast and the Midwest are going to be optimistic. But the optimism is just universal. Even in the Southwest, which is probably the weakest market right now. 60 % of people say demand is strong.

11:45I don't really understand that. In the West, where you're operating and you're describing a pretty dire picture, nearly 80 % of people are saying that the market is strong and that people want to buy flipped homes. In the West and the Midwest, very different inventory and market dynamics. The optimism among flippers is just the same, right? It's just people are just feeling good about it. And I wonder if that's because they might have lower margins expectations than you. So 12 % of people reported flipping margins of 40 % or higher, 15 % said 30 to 39%. And I know that's kind of what you target, right?

12:2935 % is kind know what your standard is? Yeah, depending on timing. Like if I'm buying in the summer, I'm going to be shooting for about 30 because I'm going to be dispoing at the right time. If I'm buying right now, I'm raised that to 40. Okay. And that's been the delta is building in a little bit more risk for, for sell time. Cause the last two years have proved to us seasonal selling is very important and you have to adapt when you get that kind of experience. Well, I think this also just kind of underscores how tough it is going to be to find deals. Because if you're looking for 30 % to 40 % margins, only 27 % of people are reporting that they're hitting that.

13:08So that means people are buying bad deals, at least by your standards, right? You think it's just people are getting antsy or too thirsty and buying stuff they shouldn't be? Well, I think it depends on a few things. like that middle with the inputs you're talking about with construction costs, that delta, that like unexpected costs rising. Labor's hard to get when I'm paying electrical. And I think it's almost double on some houses because of location. That's where the margin gets reported down. They might've walked in. I'd love to know what their expectations walking in were because we're shooting for 40, but I can tell you we're averaging about 20 when we're closing out.

13:46Yeah. And there's a couple that hit. We just hit one that was an amazing one though, that we hit about 90 % on. Let's talk about that because you got a 90 % margin. What were you expecting? Still underwriting that for 40 %? We bought that in June when tariffs have really affected disposition. So there wasn't a lot of people that wanted those heavy, heavy fixers. And so walking into that deal, because of the size of the renovation and the purchase price, we had about a 55 % margin going in with leverage. Oh, wow. Okay. And part of that is because the price was cheap on the house, but the rehab budget was so big, that means we're putting down 15%.

14:25But we were getting so much finance back to us on the construction. And leverage is a really important part. Like the cheaper the deal, the higher the returns you're typically going to get cash on cash. But the delta swings really big, you know, five grand on a deal can also affect the profit dramatically. Sometimes that's 20 % of your profit. And, you know, for us, it's like, if we're off by a month, it's 20 grand for us, right? So there's this difference in affordability. But we went into that deal. It was really beat up. I had to buy it sight unseen. And it was at a really bad time in the market.

14:59And so based on those conditions, we put that 55 % return on because we knew we were going to have a lot of unexpected issues, which we did. We also hit that return, but we still went$60 ,000 over budget. so what went right like how did you turn a difficult deal a complicated deal during a bad market into a 90 profit like tell the audience how you made that one work so well so we had to take a step back once we start seeing you know because i bought that one site unseen and again it was moldy and it was really bad and i'm used to dealing with that but what i didn't know about the house was this was one of the worst floor plans I had ever done.

15:39It was so tight. Like this was an 1800 square foot house that felt like 1200 square feet. And yet we had 20 foot ceilings. And so once we started getting into some major issues, like we had some landscaping issues in the back, which was a$10 ,000 surprise, we had buried trash everywhere that we did not know were under the stickers, we had to structurally reframe the entire house. And then the city made us do a lot of extra improvements on this house to get it secure. And once we started creeping over budget, we had to do a stop and go, okay, do we lean into this? Because us going over budget also was us upgrading a lot of things and going, okay, is there a buyer for this price point?

16:21If we can get a little bit more premium product. So I would say out of our overages, half were for construction and then half were strategic to chase a higher price point. So anytime you start getting in deep to a house, you got to pull back, audit it and go, let's look at the comps again. Do we pull back or do we lean into it? And so we leaned into that to get a premium price point because our original ARV was 1.25 and we sold it for 1.4. That's awesome. And when you decided to reinvest basically into this property, were you doing an analysis that says like, this is still a 55 % return on the new money, right?

16:58Well, the thing is our return went down. Now profit went up. Right. But we actually would have, if we would have refinanced the property, because the one thing is when you have to pivot on a construction loan, we had to come up with that extra 50 grand out of our own pocket. Oh, I see. So you weren't leveraging it. So you were putting a lot more cash in. Yeah. So instead of putting in that 15 % down or down payment on the property of the 50 grand, we had to come up with the 50. But when you're selling it for$150 ,000 more, it still brought it up. And so those are the negatives. And like as flippers, those are things that you always want to be prepared for is have those reserves set aside or access to get a secondary lender that can cover those things.

17:42Because the last thing you want to do as a flipper is to be out of gas and out of money on a project because it makes you get stressed out and it makes you make poor decisions and desperate decisions. And so just that's why I'm always big on keeping those reserves aside. You got to keep them aside. Okay. So that's a deal that went well. You got a great profit. Maybe you could share with us a deal that hasn't gone well. You know, one that you were targeting 40%, but you came in lower than that. And maybe explain how the market conditions sort of contributed to that and maybe what you would do differently.

18:16Well, I'd say there's two. One was we squeaked out with an average return where we made like about a lot of what they're saying in this report. Like 35 % of people said they made 10 % to 19%. I would say about one-third of my deals hit those numbers that we dispoed recently. And I would say the main reasons for that were permit timelines. Because it's not only are you dealing with contractors that are bidding things high. the cities are updating their energy codes like crazy with the construction going on and they're making you do a lot of things that aren't expected and so they took a lot longer because of cities and permits the contractors were busy so they took a little bit longer and then we went to sell them in november december and the market took longer right and so the reason we were in that 10 to 15 percent returns is because the deals took about 30 percent longer than we anticipated and that was all across the board that would be on the deals that we were hitting those 10 to 15 percent returns on or even the one i lost money on and we lost about 8 000 on this house and it like so end of the day not the end of the world yeah and most of that was based on the city took forever to get trusses.

19:33It was a fire repair permit. And usually they issue a repair permit fairly quickly. And it took four months to get it. And our Performa was only for seven. And I guess this is just the unforgiving nature of the market because two or three years ago, you might have gotten a little bit of appreciation, tailwinds a little bit. And not saying you would have hit your Performa, but it wouldn't have probably been a loss two years ago. But now with the softness when you go to sell, whether they're mistakes or something out of your control, but like these issues kind of compound a little bit. Yeah, and a lot of times it is stuff that you cannot control.

20:10Our job is to hedge what we can control, right? How do we get, like we actually hit, the deal we lost$8 ,000 on, we hit our budget. I would say we're actually like two or 3 ,000 under budget on it. What got us on that deal was again, the permit timelines. We can't control that. It should have been faster. And then negative impacts. okay this is like we sold this house for 50 grand less than our performa we had great showings but what got us was the neighbor oh no the neighbor during our construction timeline they bought like seven cars and they were sitting out front of their house i swear i i was this close to going out there and trying to buy them all like that's stuff outside of your control and this house should have sold for a million dollars and we sold it for 950 and those are big things that people have to pay attention to right now.

20:57If you have a negative impact on your property, it will sell for less. Because when buyers are being selective, they'll just go to the next house. We were the nicest, best looking house for sale in the market. But if they don't want to live next to the neighbors, they don't want to live next to the neighbors. So give us some advice here, James, because I'm, you know, as I said, a little surprised how optimistic people are feeling. And hopefully they are. If you're a flipper, hopefully you are making these returns. So hopefully you're getting 30, 40%. And James and I are being overly pessimistic.

21:26But I think a lot of people are interested in flipping and curious if they should get in right now. What would you say to them if they want to get into flipping either for the first time, or maybe they're a casual flipper and are wondering if this is a year that they should take a swing on something? Spend more time working on your resources and making sure you can hit the ground running. The common denominator of me not making money or maybe even losing a little bit of money is it took too long. You know, if you don't have a contractor, you can't get the work done. You get stalled out. That's how you can kind of get behind right out the gate.

22:01And so really spend time meeting that right contractor, the right broker that can analyze your deal, the right lender that can get you the right terms for your market and then walk into it. The one thing I would say for all flippers though, you know, even though I came off around a really good deals and some average deals and a couple of duds too, I will always buy. And I will adjust my returns. So right now, if I'm buying today, I'm probably selling in August or September. Not going to be great. So I just have to get my returns up. I mean, there's a deal right now that I'm probably going to buy.

22:35Actually, Dave, you know what? This is why I buy this deal right now, right? Even though I sound pessimistic, cash on cash return, we're over 40%. Okay. It's got a link view. It's a mid-century style home. Built in the 50s, less permitting. North Seattle, price point$1.6 million. good for the, for the, like the average velocity in that price point in this specific area is pretty good. It's not like one, 1.8 is kind of the slow part. So it hits all four cycles. And we've adjusted the rehab budgets to the numbers we just paid, right? So we've made the adjustments and we're feeling good about it.

23:08It's actually a really cool house. We'll talk about this later. So that's the thing. There's novelty and it's a lot of work to do, but I know what I'll buy and not buy. And you know, the reason I feel like that buys available is because people are sitting on a little bit of inventory right now. And they're getting a little nervous based on what they're reading and what they're seeing in gas prices. And so I like it when the sediment doesn't look like 53 % think it's roses and sunshine and bunnies. I like it when everyone's like, this market's terrible. When you're, we're looking at this graph, it's red, orange, green, and blue.

23:41When people are feeling the most in the orange and the red, that is the time to buy. So you don't like it because it feels frothy to you? because like people, you're going to face competition because people are too optimistic. Yeah, because they're doing the deal to do the deal or they need to put their crews to work or they need to like they got money in their bank and they're itching to spend it. That's usually when their guards are down and they'll get a little bit sloppy with their underrated. Yeah. And so I like it when people are more nervous. Like there's certain product right now I don't want to buy in Seattle because people still like it too much.

24:15I'm like, I want to wait until they don't like it. Then I'll buy it. I want the investors to pull back like daddies right now. We're seeing a compression on daddies. I haven't been a huge daddy guy, but now I'm really starting to look at them because I'm like, oh, there's some opportunities starting to pop up. All right, everyone, we got to take a quick break, but we'll have more with James on the flipping market right after this. You know what's funny about tax season? It's one of the only times I actually look at my full financial picture, what I earned, what I spent, what I saved. And every year I think I should be doing this way more often.

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