Why do all the home flippers flop?(Zillow, OpenDoor, RedFin)

Hard to make scale.

My brother-in-law is a blue collar man, he has a high-paying job in road construction and also owns a number of rental properties. He does most of the work himself so if a tenant has a water heater blow up he will replace it himself, he has friends who owe him favors so he can get low-cost help too.

If you are flipping homes yourself you will do it on the same basis and work for equity. If you are a corporation you're going to (1) have to hire people to do the work, and (2) probably hire some supervisor to drive around in a $90,000 truck to watch the first group. They all get cash before you do.

The individual home flipper working out of their own money is going to only choose projects that look very favorable. The corporation is going to hire a manager and that manager will probably be told to close a certain amount of deal flow and will feel pressured to close deals that aren't very profitable and not have such a financial incentive to keep the deals profitable.

My 2 cents - Home flipping is fundamentally unscalable due to how convoluted and complex residential markets are. These companies need to scale in order for it be profitable. However you can't apply a logistic regression equation to sq footage and parameters on a listing because there are so many other factors not listed or require boots on the ground to find out (bad neighbors, sewer smells, poor construction quality, schools).

Flipping works great in a rising market. It's a lot harder when the market slows. All these companies got in just as the market was turning directions. Additionally, even in the best of markets you can't just buy,fix and sell at a profit. You have to pick the properties carefully.

I suspect a lot of the properties that were bought were bought to fill some kind of goal for the period rather than they having profit potential.

The better investment is buying, renting and then selling a decade later. The idea is that the renter pays the mortgage and other expenses for the property. But that's too long for most companies.

From anecdotes - a fair number of sellers and Realtors learned to game the algorithms of the large-scale flippers, and sell them "turkey" properties at far-too-high prices.

And "we are geniuses at 10,000 feet!" financial industry schemes, especially ones in cyclical sectors, have a strong tendency to scale up as the tide is turning against them.

I know many independent home flippers who have made a fortune over the years. If I had any skills like that I would have joined them. Why these large companies failed? I have no idea.

I'm surprised for 3 pubic tech companies in this space that there are not more comments here...

Why did they not just engage in some sort of arbitrage situation? Seems easier.