As the housing market stabilizes and home prices continue to rise, home flippers are making steady profits buying, fixing and selling properties.
The average gross flipping profit was $62,122 for the third quarter, or 34 percent of the purchase price, slightly down from the average profit in the second quarter and slightly up from the profit in the third quarter of 2014, according to a new report from RealtyTrac. Five percent of homes sold in the third quarter were flipped — sold within a year of purchase in an arms’ length transaction.
“After curtailing flipping activity last year due to slowing home price appreciation and shrinking inventory of flip-worthy homes, real estate investors have started to jump back on the flipping bandwagon in 2015,” Daren Blomquist, RealtyTrac vice president said in a statement.
The profit margins are huge but the housing crisis reminded us just how risky the business of flipping homes can be. That’s why many of today’s home flippers are professional investors rather than part-time speculators trying to get in while the market is hot.
One factor helping investors is an influx of buyers using FHA loans, many of whom are first-time home buyers looking for starter homes. Even so there are fewer foreclosed homes available for flippers to buy and inventory remains tight, so it’s getting harder to find properties priced lower enough to guarantee a decent margin.
The median existing-home price in September was $221,900, a 6.1 percent increase over September 2014, according to the National Association of Realtors.