New RealtyTrac Report Illustrates Profits and Pitfalls for Flipping Properties 

While not at all-time record highs, flipping properties still yields impressive profits, according to RealtyTrac’s Q2 2015 U.S. Home Flipping Report. Collecting comprehensive housing data across the nation, RealtyTrac recently released its findings on the house flipping market for the second quarter of 2015.

Per Property Profit Is Popping

According to the report, 30,013 single family houses were flipped in the second quarter of this year in the U.S., which represents 4.5 percent of all single family homes sold during the quarter.

While this percentage is slightly less than what was reported in the previous quarter, that does not mean that flipping is less profitable than in previous quarters. In fact, the average gross profit on a flipped property was $70,696. Compared to last year’s average of $49,842 per flipped property, that is a significant jump.

The takeaway for flippers: Experienced flippers may find that decreasing the number of properties in play may be a wise strategy. Investing in fewer properties and concentrating on maximizing profits per property may more accurately align with current market conditions and net overall increased profit. 

Florida Is a Flipper Favorite

Among metropolitan areas with at least 50 completed flips in the second quarter, there were several Florida locations where flips accounted for the highest percentage of all home sales. Here are the percentages of total sales that were flips in these hot Florida locations:

  • Miami: 9.6 percent
  • Palm Coast: 9.2 percent
  • Tampa: 8.9 percent
  • Deltona: 8.7 percent
  • Sarasota: 8.1 percent

Of those Florida locations listed, Palm Coast and Miami had the highest share of flips acquired in foreclosure.

The takeaway for flippers: If you are in Florida, flipping is an investment worth your time. But even if you are not, there is a lesson to be learned from the Florida stats. Flippers can profit substantially by closely following properties in foreclosure. While the national number of foreclosures is lower than in previous quarters, there is still ample opportunity across the nation for flippers to invest in foreclosed properties.

Timeline Ticks Upward

The average time for holding properties rose to 179 days in the second quarter. This average time is the longest of any quarter going all the way back to the second quarter of 2007. While profits were substantially higher than in previous years, this increased hold time for properties may present flippers with new challenges.

The takeaway for flippers: When assessing the profitability of an investment in fix and flip property, it is essential to have an accurate grasp on an estimate of the time it will take to sell the property. This is a basic tenet of flipping. Increased hold times can easily undermine your profit strategies if you do not perform due diligence in accounting for potential longer hold times. When working with a hard money lender, consider all options and ramifications of a longer hold than you initially project. Your hard money lender can offer much guidance in this area. Use your resources, including the expertise of your lender, to navigate this new investment landscape.

Lower-End Means Lower (or No) Profit Percentage Overall

Properties in the $100,000 to $200,000 range posted average gross ROI of 44 percent, making these properties the most profitable overall. Flipped properties between $2 million and $5 million generated an impressive average gross ROI of 43 percent. However, those properties priced at less than $50,000 performed disastrously, with the gross ROI at a negative 12 percent.

The takeaway for flippers: Finding the sweet spot in your particular market is key. While low-end properties might seem like a good investment because of their meager investment costs, the return on low-end properties falls far short of a sure thing. Carefully considering all factors is essential to finding and flipping quality properties.

The Bottom Line

Fix and flip investing is a profitable endeavor when approached correctly. Knowing your market, understanding your ARV, and working with a team of highly skilled pros will go far toward ensuring your success in the fix and flip world. If you are ready for financing your fix and flip opportunities, please contact us. We work every day with flippers like you to fund your investments quickly, professionally, and profitably.

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