RealtyTrac: Flippers Saw Higher Profits In Q1

Posted by Patrick Barnard on May 28, 2015 No Comments
Categories : Residential Mortgage

The average gross profit on flipping a house increased to a new high of $72,450 in the first quarter – up from $65,290 in the fourth quarter of 2014 and up from $61,684 in the first quarter of 2014, according to RealtyTrac's U.S. Home Flipping Report.

Markets where flippers made the highest profit in the first quarter included Baltimore; Central Florida; Detroit; Tucson, Ariz.; and Pittsburgh.

Markets where flips had the highest share of overall sales included Memphis, Tenn.; Miami; Tampa, Fla.; Los Angeles; and Detroit.

About 17,309 single-family homes were flipped in the first quarter, about 4.0% of total U.S. sales, according to RealtyTrac.

The average gross return on investment – average gross profit as a percentage of the average original purchase price – was 35.1% for completed flips in the first quarter, down slightly from 35.3% in the fourth quarter but up slightly from 35.0% in the first quarter of 2014, according to the report.

Daren Blomquist, vice president at RealtyTrac, says the high gross profit per flip shows ‘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.’

‘The challenge for flippers in 2015 will be finding inventory to flip,’ he says. ‘Flippers ideally want to buy distressed homes that provide them with an opportunity to add value in markets where there is good affordability and ample demand from buyers for the finished flip product – whether those buyers are millennials becoming first-time home buyers, baby boomers purchasing their present or future retirement home, or buy-and-hold real estate investors looking for turnkey rental properties that enable cashflow.

‘Markets with the combination of distressed inventory, affordability and demand that are yielding the best flipping returns include places such as Baltimore, several metros in Central Florida, Detroit, Tucson, Pittsburgh, Memphis and Chicago,’ Blomquist adds. ‘Responsible flippers in these markets can do well by doing good – providing a superior product for buyers and renters – although in some cases this may mean betting on neighborhoods that are somewhere between down-and-out and up-and-coming.’

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