Flipping Houses in Vero Beach
Posted By Victoria Boss Vero Beach Realtor || 28-Aug-2014
The housing market has showed steady improvements for the past four years. The market was favorable to both buyers and sellers, increasing the average home price.
House flipping is a type of real estate investment strategy in which an investor purchases properties at a discount price, with the goal of reselling them for a profit. Profit is generated either through the price appreciation that occurs as a result of a hot housing market and/or from renovations and capital improvements.
According to data compiled by Redfin, a real estate brokerage firm, from 2001 to present, the number of flipped houses greatly increased. For this study, only homes that were flipped within a period of 12 months were taken into consideration. The data revealed that flippers experienced a positive result and performed well overall. However, a Redfin agent stated that flippers do not always acquire profit from their transactions. They have to make improvements in the home before selling it. Therefore, they have to plan diligently so that they can undertake the improvement costs efficiently and sell the house at a profit.
Although house flipping appears easy and profitable to on-lookers, it can be extremely time and cost consuming. Moreover, expectations of gains over and above the cost of repairs out of such transaction are uncertain. The repairs and improvements can cost from $1,000 and $3,000 (door replacement); to $55,000 (kitchen remodeling) and can include painting, re-carpeting, and updating the kitchen and baths to full gut jobs ranging from $60 to $120 per square foot.
After the housing bubble of 2008, banks intended to reduce their inventory levels of distressed homes from their books. As a result, banks played a major role in the flipping market. However, inventory levels of bank real estate owned (REO) properties reduced significantly from 2008 to 2013. Over 72 percent of flipped houses belonged to banks during 2008; while these figures decreased to 35.2 percent in 2013 and dropped further to 15 percent so far in 2014.
The rise in home prices has proved beneficial to flippers showing a level of flipped homes parallel to the figure of 101,800 homes during 2005. The data for 2013 reveals the highest rate of house flipping amounted to 75,500 across Redfin’s markets. The Chief Economist at Redfin stated that 2005 experienced amateur investors buying homes for a profit after selling. However, economic conditions worsened after the housing bubble of 2008 and the flippers that emerged after this are now experienced people who can determine the potential homes for flipping. It was estimated that 24 percent of flipped homes sold during 2008 were profitable; while 77 percent of homes sold in 2013 were profitable.
House flipping increased in 2014, especially in Washington, D.C., Atlanta, Fort Lauderdale, West Palm Beach, Philadelphia, Los Angeles, Phoenix, and Riverside, California. The areas of Petworth and Brookland (Washington, D.C) ranked among the top three with average gains of $312,400 and $271,900, respectively.
In 2013, the house flipping activities increased. During this time, the flipping occurred with an average of $90,200 per home.