Flipping Homes Still Hot in South Florida
South Florida showed strong numbers for the amount of homes sold that were flips during the first quarter of this year. In fact, according to RealtyTrac Inc., approximately 10% of all condominium and home sales during the period between January and March were were homes that were being flipped. This was the highest amount since Q3 of 2006 and a 9% increase since that time period last year.
RealtyTrac Inc. defines a flip as a property that has been sold twice within a 12 month period.
Investors have played their part in the recovery of the 6 year slowdown of the market by fixing up properties and adding value to homes in need of repair states Daren Blomquist, a vice president of RealtyTrac. However, too much flipping can “accelerate home-price appreciation beyond what the market can handle,” he said.
Flipping homes has represented about 7.5 percent of all home and condo sales in South Florida, according to RealtyTrac. The increase in home prices in recent years have prevented many flippers from staying active in the market, but those who are remaining are still enjoying some strong returns.
RealtyTrac reported that the gross profit for a home flipped in the tri-county area in Q1 was $65,000 which was up from $54,500 from last year. The return on investment was 51%, also up from 46% in Q1 of last year. The median purchase price for a flipped home in Q1 was $127,500 which translates to approximately a 24% discount from market value.
The current market has fewer homes that are going into foreclosure, but Florida judges are moving existing cases through the court system. This in turn is putting more homes into the hands of lenders which are putting them on the market for sale.
“The backlog was so severe that it’s taken years for properties to work their way through the foreclosure pipeline,” said Greg McBride, a senior financial analyst with Bankrate.com, a consumer website based in North Palm Beach.
Ryan Kuhlman, president of the Broward Real Estate Investors Association, stated that hedge funds that bought foreclosures too fast and for too much money during the housing rebound are now unloading those properties.
Kuhlman stated that the aggressive flippers are finding homes by knocking on doors and talking to homeowners that are faced with entering into foreclosure.
“It’s absolutely still lucrative,” Kuhlman said of flipping. “You just have to open up your parameters.”