- Austin Rutherford told his 700,000 followers that he was likely to take a loss on a recent flip in Ohio.
- Fellow TikToker Jeremy Mathis says he’s factoring in price cuts of 10% on potential deals in Miami.
- The market for flips has cooled off significantly due to lower buyer demand and rising mortgage rates.
Fins buck the music as the housing market shows signs of cooling.
Real estate investor Austin Rutherford, who has over 700,000 followers on TikTok, has spoken at length about the opportunities for wealth in real estate investing since the pandemic began. But in a recent video, he explains how his latest deal will likely result in a $30,000 loss.
“There’s a real downside to this deal,” he told Insider.
Rutherford bought the Hilliard, Ohio home last year for $248,000 and said he put in between $5,000 and $10,000 in work. Now he’s getting offers for as little as $260,000, which will likely put him in the red once costs and brokerage fees are closed.
Fins across the country — from small independent operators to large corporations — are facing tough market conditions as rising mortgage rates deter buyers. iBuyer firm OpenDoor has lost money on homes in pandemic real estate hotspots of Austin, Atlanta and Phoenix. More recently, competitor Redfin announced that it was exiting the pinball game and laying off its 13% of its workforce. And in other cases, some fins turn to well-funded investors to bail them out.
Flipping yields have also declined since last year. According to Attom Data Solutions, its typical return on investment was 29% in the second quarter, compared to 33% a year ago. Overall, the ROI for house flipping has fallen precipitously from a decade high of 53% in 2016.
In Rutherford’s original video, many of his followers encouraged him to keep the property as a rental, but he says it’s another lesson for a changing market.
“I’d rather take the loss and move on and find another deal and pay it back than try to make some money with a whole bunch of headaches,” he told Insider.
Pinball see house values slide
Also to illustrate the rapidly changing dynamics of the real estate market, Rutherford pointed to another of his rehab projects — a four-bedroom home in Pickerington, Ohio, that has plummeted in value in the space of six months. In June, the home was appraised at $355,000 without Rutherford lifting a finger. According to public records verified by Insider, the home was acquired in a multi-property portfolio sale that closed for $1.9 million last December.
Rutherford said he was on the verge of accepting an offer for just $320,000 after completing over $20,000 worth of renovations, including brand new kitchen appliances.
Another TikTok investor personality, Jeremy Mathis, who invests with his twin brother, is seeing similar signs of a slowdown in demand for redeveloped properties.
Mathis of Florida bought a 3 bedroom, 3 bathroom mansion in Fort Worth, Texas in June for $340,000 and spent $45,000 on renovations including new floors and kitchen appliances.
Mathis and his brother were hoping to fetch $450,000 for the home based on June projections. Instead, they listed in October and have subsequently lowered the price about every 10 days, where they have now lowered the ask to $399,000. At this point, Mathis says they just want to get rid of it.
It’s a much bleaker picture compared to last year, says Mathis, when “people went above the asking price when houses weren’t being repaired.”
“We’re not in that market anymore,” he told Insider.
Now, Mathis says he puts a 10% “buffer” on homes for potential deals and forecasts they will lose at least that much of their appraised value if the market continues to slide.
Rutherford remains bullish on real estate investing overall, saying hard times do indeed present opportunities for committed investors.
“You learn a lesson with every deal, I have a buddy who lost $100,000 on his first deal and now he’s a multi-millionaire,” he said.