According to a recent report by ATTOM Data Solutions, one in every 18 homes sold in the U.S. as of the third quarter of 2021 is a fix and flip.

As activity for this real estate investment mainstay keeps rising, surprisingly, profits are steadily declining for much of the U.S. -- that is, unless you are working in these target markets. If you're an active real estate investor, find out the five places where market demand is still roaring so you can lock in solid profits on your next fix and flip.

Person with sledgehammer inside home being renovated.

Image source: Getty Images.

1. San Jose, California

When looking at the highest raw profits on median-priced homes in the major metropolitan areas included in the ATTOM Data Solutions recent report, San Jose came out on top, with a typical gross profit of $213,000. The median price of homes here is $1.3 million, according to Redfin, triple the median price of homes across the U.S. and putting San Jose solidly into the expensive market category. If you're only looking at profit and have plenty of equity to draw on, this market could do well for your next fix and flip.

2. Honolulu

San Jose's close second was Honolulu, with a typical gross profit of $176,070. Interestingly, Honolulu had the smallest home flipping rate during the period, at just 0.8% of home sales. This could create a situation where you have less competition, leading to better potential returns. But it is an expensive market overall, with a median sales price of $587,450, according to Redfin, and higher days on market than other areas of the United States. A cooler market would indicate the need for patience and due diligence, perhaps with alternative exit strategies, but can offer significant profits.

3. Baltimore

Raw profits may not mean much if you're working in an expensive market and only pulling in a 25% return on investment (the national average is 32.3%, according to ATTOM data). But that's not the case with Baltimore. The typical gross profit was $145,000, putting it fifth for gross profit in the major U.S. metro areas included in the ATTOM Data study. It's also got nearly three times the average return on investment, coming in at 90.6%.

Bathroom under renovation with debris and ladder.

Image source: Getty Images.

4. Buffalo, New York

Baltimore pales in comparison to Buffalo's return on investment of 130.6%. That means for the average fix and flip, if you invested $100,000, you would pocket $130,000 or so in profits when you sold the property. That is more than doubling your money. This could be why investors with cash are heavy in the market, making up 86% of the fix-and-flip purchases in this fairly competitive market.

5. Oklahoma City

Oklahoma City had some of the highest flipping rates, at 8.8% of total homes sold. Investors found a hot market generating incredibly high returns and jumped in. The typical flip saw a 127.6% return on investment in the third quarter of 2021. But this is down by 65% from the second quarter of 2021, indicating that the market demand was likely met. There is still obvious potential for significant returns, but due diligence and multiple exit strategies here would be prudent.

The average return for a fix-and-flip investment nationwide in the third quarter of 2021 was $68,847, which, as mentioned, provided an average 32.3% profit margin. But why shoot for par when you can get a hole in one? As markets continue to tighten and competition for real estate remains fierce, it's more important than ever to make sure proper due diligence is performed and to leave emotion out of real estate investing. The markets highlighted above should offer incredible returns as long as solid purchase prices are obtained.