Is this the year for you to claim the life you want by flipping houses?
There are a number of different ways to invest in, and profit from real estate. Many will find flipping houses is exactly what they have been seeking to complete their lifestyle design with enhanced incomes and more free time. So, is 2017 going to be a great year for flipping houses? Are the conditions in alignment with this investment strategy? How does it compare to the other choices out there?
The 2017 Real Estate Market
Even though there was some soft real estate data showing up at the end of last year following the uncertainty of the presidential election, and seasonal weather, things appear to be turning up again. Zillow, RealtyTrac, Realtor’s associations, Wells Fargo, and the National Association of Home Builders (NAHB) have all weighed in. Overall forecasts are for ongoing modest growth in home values, tight inventory levels, high rents, and high demand. We may also see higher mortgage interest rates and ongoing affordability challenges. Yet, these last two factors may be moderated by job growth and easier lending.
It is also important to point out that while we may be entering the second phase of growth real estate investors have been waiting for, there continue to be many opportunities. There are still hundreds of thousands of vacant homes across America. Foreclosures and bank owned properties have actually been booming in some states as lenders speed up the process. Billions in maturing commercial mortgage loans, and some new residential mortgage defaults will continue to create urgency among borrowers to forge deals.
Market Conditions Needed for House Flipping
Profitable house flipping requires one of two factors. Properties either need to be ripe for upgrading to be sold at new market highs, or to be purchased at substantial discounts, which provide room for repairs and reselling at market rates.
According to the latest House Flipping Report the average gross profit on a house flip stands at just over $60,000. The average gross house flipping return was recorded at 47.1%. ROI topped 100% in at least 7 cities according to that data.
The ongoing disparity between discounts on distressed properties for sale, and new home construction which is pushing property prices to new highs suggests there will be plenty of spread for all types of house flippers in 2017.
Comparing Real Estate Investment Options
Obviously, flipping houses isn’t the only way to make money in real estate. There are a variety of real estate related careers to get into. Though few offer the flexibility and financial rewards of flipping. Although publicly traded REITs and crowdfunding has somewhat fallen off the radar in the last few months, some will continue to default to them. The downside of these options can be high volatility, lack of security, and perhaps skinnier yields as mortgage interest rates rise. Investing in rental properties is still very popular, though buy and hold investors are having to look further and harder to find deals where the numbers work. Rentals can be great for steady cash flow, and long term wealth building. They just aren’t designed for delivering big lump sums of cash in the short term. Wholesaling real estate is effectively a form of flipping, just without the fixing up part. This can be a very attractive way to get in for those who are light on investment capital and who aren’t interested in improving properties themselves.
Still, for those that want to make big paydays, do it quickly, and who love the idea of flexing their creative talents and adding value to communities, fixing and flipping houses rocks as a strategy for 2017. It can be a good choice for those just embracing real estate now, as well as a fun way to diversify, augment, and expand other strategies they have already been working on.