Are Investors Flipping

Are Investors Flipping

This morning a customer said to me, “I hear that people are starting to “flip houses” again.

What is going on is not what she had in mind. “Flipping” has always been part of the real estate market and probably always will. When a savvy investor find a home that is in need of repair with a good prospect of appreciation, he or she buys. They complete repairs and maintenance, add money and value to the property and attempt to sell at a profit. If things work out, they “flip” and make money.

Seven or eight years ago, when the real estate market was getting out of hand, people were buying and flipping without doing a thing. That is the very rare case today. The bottom of the market is disappearing and only a smart investor is able to buy a home right, complete the repairs economically and “flip”. It happens, but…

An article in the Bloomberg Business week, 11/14/2013, referred to the cooling market. The report suggests bidding wars that were starting over the last year are disappearing due to higher mortgage rates and home prices.

Inventories are increasing giving homebuyers more choices. The National Association of Realtors® reported that inventory levels of unsold homes rose in September from a year earlier – the first time since 2011.

None of this bodes well for “flipping” an home without significant investment.

More on this issue…

A recent article in the Sarasota Herald Tribune shows a map in an article stating “Real estate flipping makes a comeback”. The map shows areas where homes have been bought, then sold within 6 months. The vast area of the map shows 1-33 “flips” while a section in Port Charlotte shows over 100. Looking closer, that section is the area around Midway and Harbor Blvds where the small, old homes are located. These homes, built in the 1960’s have sold cheaply but even these are rising in price. Yes, there is are sections of Port Charlotte where one can find an inexpensive “fixer-upper” but there are fewer of these than in the past and we will see fewer in the future.

There will always be (and always has been) a market for investors to buy cheap, fix up and make a profit, but it is more difficult than in the past.

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