- Austin Rutherford told his 700,000 followers he would likely suffer a loss in a recent comeback in Ohio.
- Fellow TikToker Jeremy Mathis says he’s factoring in 10% price drops for potential deals in Miami.
- The flip market has cooled significantly due to lower buyer demand and rising mortgage rates.
Pinball machines face the music as the housing market begins to show signs of cooling.
Real estate investor Austin Rutherford, who has more than 700,000 followers on TikTok, has spoken at length about wealth opportunities in real estate investing since the start of the pandemic. But in a recent videohe explains how his latest deal will likely result in a loss of $30,000.
“There is a real downside to this business,” he told Insider.
Rutherford bought the Hilliard, Ohio home last year for $248,000 and says he did between $5,000 and $10,000 in work. Now he’s getting offers for just $260,000, which after closing costs and agent fees will likely put him in the red.
Pinball machines across the country — from small independent operators to large corporations — are facing tough market conditions as rising mortgage rates freeze buyers. The iBuyer OpenDoor Company lost money on houses in pandemic real estate hotspots Austin, Atlanta and Phoenix. More recently, competitor Redfin announced he was getting out of the flipping game and laid off its 13% of its staff. And then in other cases, fins look to deep-pocketed investors to bail them out.
Rollover yields have also declined since last year. Typical return on investment in the second quarter was 29%, compared to 33% in the same period last year, according to Attom Data Solutions. Overall, house flipping ROI has fallen precipitously from a decade high of 53% in 2016.
In Rutherford’s original videomany of his supporters have encouraged him to keep rental property, but he says that’s another lesson for a changing market.
“I’d rather take the loss and move on and find another deal and get it back than try to make money with a whole bunch of headaches,” he told Insider.
Pinball machines see house values slide
To also help illustrate the rapidly changing dynamics of the real estate market, Rutherford pointed to another one of his rehabilitation projects – a four-bedroom house in Pickerington, Ohio, where the value has slipped in six months. In June, the home was appraised at $355,000, without Rutherford lifting a finger. According to public records reviewed by Insider, the home was purchased in a multi-property portfolio sale that closed last December for $1.9 million.
Rutherford said after completing more than $20,000 in renovations, including new kitchen appliances, he’s set to accept an offer for just $320,000.
Another TikTok investment personality, Jeremy Mathis, who invests with his twin brother, is witnessing similar signs of slowing demand for rehabbed properties.
Florida-based Mathis bought a 3-bedroom, 3-bathroom property in Fort Worth, Texas, for $340,000 in June and spent $45,000 on renovations, including new floors and kitchen appliances.
Mathis and his brother were hoping to get $450,000 for the house based on the June projections. Instead, they signed up in October and then dropped the price roughly 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 than last year, Mathis says, when “people were going over asking price when houses weren’t being fixed.”
“We’re not in that market anymore,” he told Insider.
Now, in potential transactions, Mathis says he’s factoring in a 10% “buffer” with homes, projecting them to lose at least that much in their appraised value as the market continues to slide.
Rutherford remains optimistic about real estate investing as a whole and says tough times actually present opportunities for committed investors.
“You learn a lesson in every trade, I have a buddy who lost $100,000 on his first trade and now he’s a multi-millionaire,” he said.