The Facts about House Flipping

The art of flipping a house for profit has been around for years yet it is only the past 15 or so that it has skyrocketed. The interest behind house flipping has generated websites, seminars, classes, and even training groups designed to help the general public learn how to flip a house successfully. In reality, is house flipping a way to make money or just the latest trend in real estate?  If you are considering a career in house flipping as a real estate investor, you can look at the reports from the past couple of years in order to recognize if you are able to make a profit from house flipping. The Numbers Don’t Lie RealtryTrac recently released the most recent Home Flipping Report and it showed almost 33,000 single family house flips in Q3 2013. This is a decrease of 35% from the Q2 reports in 2103 but only down 13% from the same quarter in 2013. Sometimes a drop in the buying power can signify a housing market shift. The third quarter of a year is the summer months and there are plenty of homes for sale during this time period. Fewer homeowners are willing to negotiate on prices during this time due to an increase in traffic and high hopes for a qualified buyer. House flippers tend to buy in the more desperate months and take the “off” months to utilize their contractors and complete projects. During the winter months, contractors are more available to work on flip houses and this is a benefit to the real estate investors. They can finish the house on a shorter time frame and have the house on the market by spring and summer. If you like numbers, here are some more that may determine your final decision.
  • The average real estate investor made an average gross profit of close to $55,000 on a single family house flip in Q3, which was an increase of 12% from the same quarter in 2012.
  • In total, 968 high end homes throughout the nation were flipped in Q3, which is 34% higher than a year ago.
  • High end flips were completed in the New York Metro area, Los Angeles, San Francisco, San Diego, and San Jose.
  • There was a 42% increase on house flips in the $1 million to $2 million range over the past year and a 3505% increase in the homes priced $2-5 million.
There is a higher risk to flipping the luxury homes as the initial investment is greater but the potential profit can be worth the risk. The high end flips yield a profit of more than 4x the average for a single family home. Larger Cities are still experiencing growth in the real estate flipping markets but some have slowed like Phoenix, Tampa, and Orlando.  Many house flippers are holding onto the homes and renting them out. With the combination of lower foreclosure rates and less inventory in the new homes being built, house flippers can incorporate the modern features wanted by the public demand.  

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