Fix & Flip on the Rise

The legion of viewers hooked on fix & flip TV shows on networks like A&E and Spike TV isn’t just about “reality” that may be a bit “stretched.” Known as reality TV, these shows take viewers behind the scenes with investors who locate, bid on, buy, repair, and sell homes in weeks to months. It’s called Fix and Flip, and it’s exciting to many.
When the housing market crashed, there were a lot of these investors caught holding homes that they couldn’t sell when prices were crushed in short order. However, they’re back, and fix & flip is becoming a major market activity again.
RealtyTrac defines a home as a “flip” if it’s bought and resold within six months, and reports that flip sales were up 16% in 2013 over 2012. Even more telling, flips were up a whopping 114% from 2011. In 2012, flips accounted for 156,682 single family home sales. If you’re flipping, how are you doing compared to this average: RealtyTrac says the average profit was $58,081 last year? In the fourth quarter that number jumped to $62,000.
While you may be watching reality TV flippers snapping up homes at under $100k, more expensive homes are becoming very popular as well. Flip sales of homes valued at $400,000 or more were up 36% last year. Turnaround times for flips dropped, as RealtyTrac reports that in 2013 flips took an average of 84 days, down from 100 year-over-year.
Strong home price appreciation has kept flipping popular, even as the inventory of foreclosure homes has dropped. Only 21% of all flipped properties in 2013 were foreclosures. That’s down from 27% in 2012 and 32% in 2011. Despite fewer foreclosures from which to choose, the average discount below market value for purchases remained at 13% in 2013.
Obviously this is a local market driven activity, and some markets are much hotter than others. However, investors who have been considering fix and flip may want to survey their markets for opportunity.