Original article posted on my blog at http://housinguniverse.com/davidoldenburg/real-estate/property-flipping-profits-soar/
Have you seen the latest RealtyTrac® stats on property flipping and the big increase in profits? More on that in a minute. There is not a week that goes by that someone doesn't say to me, "David, how can I buy a home, fix it up and sell it for a profit?" I'm talking about property flipping, the current get-rich-quick wave that is spreading across America. Here in California, property flipping has been hot for the last 18 months, as home prices have been recovering and the supply of homes has been low. It was just last October when Realtor.com ranked 10 cities showing a strong housing recovery, and 7 of those cities were in California.
Average Property Flip Returns Over $18,000!
According to RealtyTrac®, the amount of people making money flipping homes is huge! However, where you choose to flip homes is equally important, as property flippers lost money in 27 out of 100 markets. The number of homes flipped, held for less than six months and sold again, increased by 19% from a year ago and up 74% from the first half of 2011. The average return on investment is 9% and the average profit is just over $18,000 per single-family residence flipped. Profits are up big, with a 246% increase compared to the property flipping profits for mid-year 2012. Looking back to 2011, there was an average loss of just over $13,000. This proves just how volatile property flipping can be. An investor who lost money in 2011, could have done the exact same thing with positive results in 2013. Of course, location, location, location, is the rule and property flipping is no different.
Hot Markets For Property Flipping
First, the margins are narrow. I mean really narrow, with investors buying homes on average 5% below market and selling for about 1% over market. According to Daren Blomquist, vice president at RealtyTrac, "Out of the 100 markets we analyzed for the report, 32 had declining flipping numbers, including perennial flipping hot spots like Las Vegas, Phoenix, Southern California and Atlanta. Still flipping was on the rise in more than two-thirds of the markets, including New York, Washington, D.C., Chicago and several Florida metros." I know first-hand that here in California the big returns are getting harder and harder to get. I consult with property flippers and help them analyze the profit potential of a property, including sometimes helping with private money financing, and there is definitely more caution today compared to 6 months ago.
Property Flipping 101- It's A Game Of Hot Potato!
Property flipping is sometimes like a game of hot potato, buy the home, fix the home up, sell the home for a profit (hopefully!), then rinse and repeat. The challenge here in California and many other areas across the nation, is that property values have been rising. I mean really rising. Some local areas in California have seen values increase by as much as 50% in the last 12 months! These are gains in value (based on %) that exceed the 2005 peak of the market. Investors have seen home prices rise, fewer buyers who can qualify for the higher prices and interest rates have also risen! The higher prices rise, the higher interest rates rise, the more likely an investor will be left holding a hot potato home that must be sold quickly for a loss.
A Local Perspective- Property Flipping In Sacramento, CA
Sometimes the best information is obtained from those actually in the trenches. Kevin Goehring, Realtor and Broker at California Seller Realty, had this to say about those wanting to flip homes and get rich, "There is no easy formula for making money with property flipping. A property flip is like a finger print, there are no two that are the same. If you do not have a team on your side, you will almost certainly lose money. At the very least, you need an incredible Realtor, a skilled lender who can do any loan and even find private money, and some great connections to get professional work done inexpensively when a home needs repairs. Yet, I meet investors each day who have done no planning at all."
The Property Flipping Profits Could Continue
The housing market, while recovering in many areas of the nation, is still very fragile. Interest rates rising, concern over the economy, the financial problems in Europe, and many other factors could limit or reverse the current recovery. The good news is that demand in many areas is still high and supply is low. Mortgage rates have risen, but are historically low. It is still possible to buy a home below market with cash and sell for enough to turn a profit. While there is profit, there will be investors willing to put down money and take a chance. For the latest on real estate, mortgage and other areas of real estate, be sure to subscribe for FREE!
About Author: David Oldenburg is a professional writer and blogger and real estate broker for over 20 years. He is the CEO of a real estate company and branch manager and producing mortgage professional in the Sacramento, CA area. He has hosted live radio for the last 18 years, helping more than 10,000 people buy, sell, refinance and invest in real estate. David specializes in helping people buy, sell, refinance and invest in real estate in California. To discuss your situation free of charge, contact David through Linkedin at http://www.linkedin.com/in/onlinemoneyshow or Facebook at https://www.facebook.com/davidoldenburg1 If you are seeking help outside of the CA area, contact David for a free referral to a real estate and/or mortgage expert in your area. Be sure to connect on Google+, Facebook and LinkedIn.