Who says flipping is dead?
Since the first of the year, flippers who follow the soaring price increases in the hottest California and Southwestern markets have been doing very well indeed.
Now it’s clear that those who operate in the high end of the market in the hot spots, where both risk and reward are highest, have been returning profits that put plodding buy-and-hold types to shame.
The latest data from RealtyTrac out today shows flipping as a whole (where a home is purchased and subsequently sold again within six months) was down 35 percent from in the third quarter— in the third quarter of 2013, and down 13 percent from the third quarter of 2012.
Yet investors made an average gross profit of $54,927 on single family home flips in the third quarter. That was up 12 percent from an average gross return of $48,893 in the third quarter of 2012.
The reason is a lot more folks are flipping at the high end by buying and selling homes for $750,000 or more. A total of 968 high-end homes nationwide were flipped in the third quarter, up 34 percent from a year ago. More than three-fourths of all high-end flips were in just five markets: the New York metro area and four coastal California markets — Los Angeles, San Francisco, San Jose and San Diego.
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Super High-End Flipping
Super high end flipping is even hotter. Flips on super homes priced between $1 million and $2 million increased 42 percent year over year, while flips on homes priced between $2 million and $5 million increased 350 percent year over year. The luxury market is strong. A recent study by the Luxury Institute for Coldwell Banker Previews International found that, on average, affluent consumers with incomes of $400K+ are spending 225.4% more on a residential property than consumers with incomes of $250K to $399K. Affluent consumers with a net worth of $2mm+ are spending an average of 97.2% more than consumers with a net worth of less than $2mm.of those who are not considering a purchase, very few indicate they view the market as risky.
“But the sharp rise in high-end flipping indicates there is still good money to be made for flippers willing and able to take on the additional risk of buying and rehabbing more expensive homes. With that higher risk also comes the potential for higher reward. The average gross profit on each high-end flip equals more than four times the average gross profit on each flipped home in the lower price ranges,” said Daren Blomquist, vice president at RealtyTrac.
Top 15 Markets for Profitable Home Flipping
Flipping Gross Profits, by State
*Non-disclosure state where prices are not required to be disclosed on sales deed
Photo: Jeremy Levine Design