'Flipping' is Back as Gross Profit Soars on Bargain Homes

'Flipping' is Back as Gross Profit Soars on Bargain HomesFlipping houses — a hallmark of the heady days before the housing market collapse — is waging a comeback of sorts, but it’s becoming tougher in communities where few distressed bargains exist.
RealtyTrac reported this week that 136,184 single-family home flips — where a home is purchased and subsequently sold again within six months — occurred in the first half of 2013, up 19 percent from a year ago and up 74 percent from the first half of 2011.
Data also shows that investors made an average gross profit of $18,391 on single family home flips in the first half of the year, a 9 percent gross return on the initial purchase price.
That’s up a sharp 246 percent from an average gross return of $5,321 in the first half of 2012 and an average loss of -$13,206 in the first half of 2011.
Real estate investors who flipped homes in the first half of the year purchased those homes at a discount of 5 percent below estimated market value on average, and sold them at a premium of 1 percent above estimated market value on average.
Flipping continues to be profitable in many markets, particularly those where the home price recovery is still fresh and a recent rebound in foreclosure activity allows investors to find distressed inventory at a discount.
Florida takes the prize with communities in 7 out of the top 15 most profitable areas for home flipping (see chart below).
But home flipping is tapering off in markets where fewer of those bargains are available, said 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, Blomquist said.
“Many investors who buy homes to flip have holding restrictions placed on them, so they rent the property with the idea that after a certain period of time they’ll put it on the market and sell it,” said Sheldon Detrick, CEO of Prudential Detrick/Alliance Realty in Oklahoma City and Tulsa.
And that’s just fine with most investors since rental rates are surging in many areas.
“Many investors who may have intended to flip properties are not putting them back on the market because they can rent the property for a profit while it continues to appreciate,” Detrick said.
Here are the top 15 markets for profitable home flipping, according to RealtyTrac:
'Flipping' is Back as Gross Profit Soars on Bargain Homes

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