Flipping Rates, Profits at 10-Year Highs: More Blue Skies Ahead?

Posted by Bobby Montagne on Feb 21, 2017

More than 6 percent of all home sales across the nation were fix and flips in 2016, the highest rate since 2006. Home flipping profits were the highest since 2000. What can the numbers tell us about the real estate market and the potential for home flippers in 2017? Let’s look at the stats….

The Fix and Flip World Right Now – The What, the How, and the Why

Definition of a Fix and Flip.  A home sale is considered a flip if it is sold twice within a 12 month period. Using that definition, home flips reached their highest rate in ten years in 2016.

National and Regional Home Flip Numbers. The national average of flipped houses was 6.1%. Las Vegas had the highest rate of flips with 10.5%. They were also the leader in 2015 with 9.6%. Detroit and Chicago saw the highest rate of increase, and the city with the lowest rate of flips was Wichita, Kansas.

Home Flipping Profits Up - Especially in the DC Metro Area. Home flipping profits were up generally across the country, reaching their highest rates in many cities since 2000. And many of the neighborhoods with the highest returns are in the DC Metro area. According to DC Urban Turf, Washington DC area neighborhoods such as Petworth, Del Ray, Brightwood, 16th Street Heights, and Anacostia continue to give fix and flippers returns on investment of between 75 and 133 percent!

rooftops.jpgTypes of Home Flips. Flips in 2016 generally involved more actual improvements than previous years. What does that mean? Flips fall into two general categories: value-added and speculative.

Value-Added Flips. When a buyer buys a distressed property and does the deferred maintenance and/or improvements needed to actually increase the value of the house and make the house more appealing to a larger group of buyers.

Speculative Flips. When a buyer buys an undervalued property (often at foreclosure, auction or private sale), then sits and waits until the local market goes up, then sells without putting any substantive work into it.


Percentage of Home Flips That Added Value. Using permit data from BuildZoom, Trulia calculated the share of flipped properties that had building permits issued in the twelve preceding months. In Las Vegas, that number was 11.6%. Remember that many renovations don’t need permits and not all contractors get them, but this number (percentage of flipped houses with building permits) is the largest since 2000, which suggests that more home flippers are truly adding value to properties.

Home Values Rising. According to RealtyTrac End of Year Report, the national median home price was up across the nation with some double digit increases and some record prices. “Among 201 metropolitan areas with a population of at least 200,000, 89 metro areas (44%) reached an all-time home price peak in 2016. 44% of housing markets reached a new all-time peak.” House flipping profits are closely linked with home sales prices, so this is generally great news for the flipping industry.

Want to know the top DC Metro area neighborhoods for flipping this year? Check out our recent blog, It's Flipping 2017!  5 Washington DC Hotspots to Watch This Year! 


Fix and Flip



 

Bobby Montagne

Author

Bobby Montagne is a real estate entrepreneur with three decades of experience in commercial and residential property development, finance and sales. Having successfully overseen $15 billion in career transactions, he is among an elite class of real estate innovator that has consistently delivered high quality returns to partners and investors.