House flipping, the term used for purchasing a home as a short term investment, making improvements and then selling it, had a moment back in the years leading up to the Great Recession. After home values fell, it became harder for investors to turn a quick profit, so the practice largely went out of fashion. But now it appears the trend is back on the rise.
According to Realtor Magazine, more consumers are flipping houses again, but investors aren’t following the same path as those during the housing boom.
A recent report from CoreLogic, a real estate data firm, found that today’s short-term investors are focused more on adding value rather than speculating on prices. CoreLogic defines a home flip as the purchase of a property with the intent to sell within a two-year period for profit.
According to the latest data, the rate of home flipping in the U.S. was 10.9 percent of all home sales of the fourth quarter of 2018. While rates varied throughout the nation, they tended to occur more frequently in the Sun Belt metros and lowest in the Rust Belt metros. According to the report, eight of the top 10 metros with the highest flipping rate in the fourth quarter of 2018 were in the Sun Belt region, with Birmingham, Ala., Memphis, Tenn., and Tampa, Fla. leading the way.
However, two of the top 10 were actually located in the Rust Belt region: Camden, N.J. and Philadelphia.
Metros with the highest average flipping rates, as of the fourth quarter of 2018 included the following:
- Birmingham, Ala.: 16.5%
- Memphis, Tenn.: 16.2%
- Tampa, Fla.: 15.1%
- Las Vegas: 15%
- Camden, N.J.: 14.9%
- Phoenix: 14.8%
- Palm Bay, Fla.: 14.1%
- Philadelphia: 14%
- Lakeland, Fla.: 13.9%
- Atlanta: 13.8%
By contrast, metros that had the lowest number of home flips were Austin, Texas; Bridgeport, Conn.; and Hartford, Conn.
House Flipping Less of a Risk
The report from CoreLogic notes that home flipping has become less risky over the years, which could help explain why the trend is back on the upswing. Flippers are beefing up their investments by focusing on adding value to the property before reselling, helping ensure a higher profit.
“We’ve seen growing signs that flippers are getting increasingly good at buying properties at a discount while the premium they’re selling for has remained mostly constant,” the report states. “This is yet more evidence that flipping today is less risky and less speculative than during the 2000s.”
Where Home Flips Pay Off Most
The metros with the highest median returns on a flip are as follows:
- Detroit: 95.9%
- Philadelphia: 92.8%
- Pittsburgh: 75%
- Cleveland: 70%
- Akron, Ohio: 65.7%
- Baltimore: 63.6%
- Buffalo, N.Y.: 62.3%
- Wilmington, Del.: 60.1%
- Toledo, Ohio: 59.4%
- Milwaukee: 58.9%
Investment Property Financing from Mid America Mortgage, Inc.
Interested in purchasing an investment property of your own? Mid America Mortgage, Inc. offers competitive rates and personalized service on Investment Property Loans. Connect with us today to learn more and request a free, no-obligation rate quote. 866-544-7013