Home Flipping: Where The Biggest Profits Are
With real estate values rising, gross profit from U.S. single-family homes bought and resold within 12 months hit a record average $ 72,450, or 35.1% of the flipper’s purchase price, in the first quarter. Florida cities had some of the best gains, above 60%. But Baltimore, Md., came out on top, with the average flipped home returning a gross profit of 94.1% or $ 117,942, in a home-flipping analysis by foreclosure data firm RealtyTrac.
Gross profit was calculated as just the resale price less the price that the flipper originally paid for the home. It doesn’t include fix-up costs or financing.
Top Cities For House Flipping
The highest average gross profit on flips completed in Q1 2015, after Baltimore, came from Flo rida (the Daytona Beach area, Ocala, Lakeland and Tampa); Detroit; Tucson, Ariz., and Pittsburgh.
The 17,309 single-family homes flipped in Q1 accounted for 4% of all single-family home sales — the lowest percentage since mid-2011.
“The strong returns for home flippers in the first quarter demonstrate that there is still a need in this recovering real estate market for move-in ready homes rehabbed to more modern tastes, particularly given the dearth of new homes being built,” Daren Blomquist, vice president at RealtyTrac, said in the report.
Home Flipping Tactics
Blomquist says that the challenge for house flippers this year will be finding inventory to flip — typically flippers go for distressed homes that they can fix up, in markets where there is good affordability and demand.
He says that in the markets with top returns, “responsible flippers” can do well but may need to bet “on neighborhoods that are somewhere between down-and-out and up-and-coming.”
Memphis and the Florida cities of Ocala, Miami, Tampa and Sarasota had the greatest share of flips, between 7% and 11% of all single-family home sales in those markets. Los Angeles was close behind with nearly 7%.
Investors Buy Flipped Homes
Real estate investors and second-home buyers bought more than a third of flips finished in Q1, RealtyTrac reported. The average time to flip a house ran 176 days.
Price ranges for flipped homes ran between $ 100,000 and $ 300,000 for more than a third of flips. A little over 2% of flips topped $ 1 million. The best returns were on the ones priced $ 100,000 to $ 200,000 and between $ 1 million and $ 2 million.
Follow Donna Howell on Twitter: @IBD_DHowell.
Related: New Home Sales Outlook Calls For Big Jump This Year.