What a business! While I loathe the word “flipper”…I have to admit that I love cashing the checks! And from all appearances, house trading, which I prefer to house flipping, is EXTREMELY profitable.
A new report by Realtytrac shows that over 17,000 properties were flipped in the first quarter accounting for 4% of all single family home sales during the first quarter of 2015.
The average gross profit (excluding holding costs, rehab expenses etc) for completed flips in the first quarter was $72,450, up from $65,290 in the previous quarter and up from $61,684 in the first quarter of 2014 to the highest level going back to the first quarter of 2011, the earliest where data is available. The average gross return on investment (ROI) was 35.1 % for completed flips in the first quarter.
Obviously there’s some serious money to be made in this business…IF you know what you’re doing. And despite what some Realtors may say, they need us in the real estate food chain.
“The strong returns for home flippers in the first quarter demonstrates that there is still a need in this recovering real estate market for move-in ready homes rehabbed to more modern tastes, particularly given the dearth of new homes being built,” said Daren Blomquist, vice president at RealtyTrac. “The challenge for flippers in 2015 will be finding inventory to flip.
Flippers ideally want to buy distressed homes that provide them with an opportunity to add value in markets where there is good affordability and ample demand from buyers for the finished flip product — whether those buyers are millennials becoming first-time homebuyers, baby boomers purchasing their present or future retirement home, or buy-and-hold real estate investors looking for turnkey rental properties that cash flow.
“Markets with the combination of distressed inventory, affordability and demand that are yielding the best flipping returns include places such as Baltimore, several metros in Central Florida, Detroit, Tucson, Pittsburgh, Memphis and Chicago,” Blomquist continued. “Responsible flippers in these markets can do well by doing good — providing a superior product for buyers and renters — although in some cases this may mean betting on neighborhoods that are somewhere between down-and-out and up-and-coming.”
More than half of all homes flipped in the first quarter of 2015 sold (flipped) for between $100,000 and $300,000. What I find most interesting is that 10 of the top 20 house trading markets in the country are located in Florida. There’s tremendous profit opportunity in the Sunshine State!
If you’re a private investor looking to capitalize on the house trading market, we may have some options for you.
You can read the entire RealtyTrac report here.