House Flipping is on the Upswing as Big Investors Stand Ready to Snap Them Up
With housing prices soaring to more than 12% over what they were this last summer, real estate investors are starting to think about flipping again. The last few years have been pretty painful for the buy and hold investor, but with recent market trends, things are looking up.
Daren Blomquist, Vice President of RealtyTrac, said recently, “it’s a perfect storm for flipping right now in many parts of the country because home prices are bounding off the bottom. That is something that flippers can catch on the coattails of and ride that wave as long as it lasts”
During the first half of 2013, there has been a 19% increase in homes flipped since this time in 2012; 74% over the same time in 2011. Flipping houses generally signifies the acquisition, rehabilitation and sale of a property within a six month period of time.
The great news is, though, that real estate prices have risen significantly since 2011. Investors averaged a gross profit of $18,391 or 9% gross return; that is a 246% increase over 2012.
Market conditions today have allowed huge investors like Blackstone Group to buy up vast quantities of distressed properties and rehab them for considerable profits as buy and hold investments. That they continue to do so is a good indication of where the market stands, showing that flipping real estate is a profitable practice at the moment.
While big investment enterprises may not be responsible for the current upswing in house flipping, they may very well be the catalyst for it. Rick Sharga, who recently took a position as Chief Spokesman for Auction.com said, “now that the institutional investors are doing buy and hold, a lot of these guys can’t compete with their checkbooks. In some cases, the individual investors are flipping them to the institutional investors.”
While larger investment firms generally have in house renovation teams, it is sometimes more profitable for them to pick up properties that have already been rehabbed by independent investors. Of this trend, Blomquist said, “So the flippers are kind of the in-between middleman who is getting the property into good rentable condition and then selling to the institutional investors.”