Flipping riskier, but more lucrative

As home prices rise, so have the costs of flipping. Despite the additional obstacles of coming up with more cash per flip, flippers in this economy are finding that the reward is worth it.

Although home flips made up only 4.5 percent of sales in the second quarter of 2015 (down from 4.9 percent a year ago) according to RealtyTrac, flipping returns have increased to more than 35 percent, up significantly from 24 percent in 2014.

With homes in higher price brackets and in many cases in need of much repair, the average home flip now takes six months, an eight-year high, RealtyTrac reported. Flippers who started with properties in the $100K-$200K range yielded the highest returns, at 44 percent.

Location also has a lot to do with flipping success, with Chicago, Dayton and Baltimore showing the highest returns on investment. The advice of RealtyTrac? Proceed with caution.

"Despite the rise in flipping returns in the second quarter, home flippers should proceed with caution in the next six to 12 months as home price appreciation slows and a possible interest rate increase could shrink the pool of prospective buyers for fix-and-flip homes," said Daren Blomquist, vice president at RealtyTrac.

"While average flipping returns are up substantially from a year ago at the national level and in moderately priced markets such as Miami, Atlanta, Phoenix and Minneapolis, flipping returns are softening in some of the higher-priced markets such as San Francisco, Seattle, Denver and Los Angeles," he said.