When the housing market went bust, house flipping also went bust with most investors on the sidelines for several years. As real estate prices have made steady gains for several years now, house flipping has made a come back.
Unfortunately, the numbers are screwed and almost impossible to determine. Generally, house flipping is analyzed by looking at transactions where a house was bought and sold within 6 months (some analysts look at 12 months between a buy and sell). The problem today is there are still a significant number of foreclosures affecting the market. These transactions can look like house flipping but the banks don’t typically make improvements.
Recent House Flipping Data
Year on year, house flipping has increased a little over 11% and continues making small increases in the number of transaction taking place. The housing bust taught everyone some hard lessons including seasoned house flipping professionals who also took some very real losses. As these investors continue venturing into the market, they are doing so with more caution and taking a second and third look at the numbers before pulling the trigger.
There are fewer investors house flipping today than there were in the glory days back before 2007. Those that are back in the house flipping market are putting more money down and making calculated bets on smart renovations.
How House Flipping Looks Today
Recently, a couple of experienced house flipping partners bought two single-family houses. The first one was purchased for $62,900. The rehab cost about $28,000 for a total house flipping investment of $90,900. The house sold for $139,000 bringing a profit of $48,100. The other house was purchased for $79,000, took $25,000 to renovate, and sold for $149,000. The profit came to $45,000. Certainly, there is money to be made in house flipping today when you perform your due diligence.
Cash is king in the house flipping market. Qualifying for bank loans is still almost impossible, making your own cash and/or private money the primary mover in today’s market. But this gives the all cash investor the upper hand when they can close a deal much faster than say a first time buyer that has to bargain with both the seller and the bank. Cash can also get you a decent discount when the seller needs to sell fast. Not much has changed in the business other than better number crunching and bringing cash to the closing table.
Stick to Your Budget With House Flippping
There is no shortage of houses needing upgrades in today’s market. However, your best opportunities are houses that are truly in rough condition. These are houses that first time and repeat buyers avoid. Although an all cash offer will be accepted before a first time buyer struggling with a bank loan, the first time buyer will drive the price up to near retail value. The truly rough houses are the ones that have to be sold at wholesale prices.
What investors are finding in today’s house flipping market is that if your renovation budget exceeds 25% of your expected sales price, you’re probably taking too much risk. Smaller, less sexy upgrades are more practical. Window replacements, minor kitchen remodels, and fixing garage doors are some of the most common improvements being made.
If you want to work directly with me on the house flipping business model or any of the other investing models that have proven highly profitable, please join me at www.wendypatton.com/what-is-wendy-pattons-inner-circle.
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Several times each week, I make the most current real estate investing information available to readers. This time, it’s about house flipping but the information I provide changes constantly to stay current with the market. Be sure to check back at: www.wendypatton.com. Also, get started learning how to do NO CASH lease options on real estate by picking up a copy of my bestseller book: Investing in Real Estate with Lease Options and Subject-to Deals.
By Wendy Patton
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