For real estate investors involved in flipping properties, having data to support investment decisions allows for smarter and more profitable strategies.
The 2015 US Home Flipping Report compiled by RealtyTrac provides detailed information regarding the state of affairs for real estate investors across the country. After studying the report, we’ve extracted some information to highlight that may interest our hard money borrowers.
Home flipping was the most popular it’s been since 2007.
The report, which defines a flip as a property that is sold for the second time within a 12-month period, found that the number of real estate investors who completed one or more flips in 2015 was the highest it’s been since 2007. The data collected from 950 counties and more than 80% of the population found over 110,000 active flippers in 2015 – the most since 2007’s 130,000.
It’s not just about the large investors.
While the number of active real estate investors is on the rise, the number of flips per investor indicates a rise in smaller investors entering the market. In 2015, the average flips per investor was just 1.63 – the lowest since 2008.
Investors are making money.
Perhaps not coincidentally – the increase in real estate investors coincides with an average gross profit per home that’s the highest it’s been in 10 years. According to the study, the average flip sold for 5% above the estimated market value for an average gross profit of $55,000*.
Where are investors doing their flips?
It is no secret that distressed properties in larger metro areas provide ample opportunities for real estate investors to purchase a property that can be fixed up and resold at a premium. In fact, the study shows that flipped houses were originally purchased at 26% below the estimated market value.
Here is how some of Asset Based Lending’s most popular hard money lending areas stacked up last year:
New York – Newark – Jersey City (NY, NJ)
2015 Flipping Gross Profit: $120,000*
2015 Gross ROI: 61.5%
2015 Median Purchase Price: $195,000
Year Over Year Percent Change: 12%
Philadelphia – Camden (PA, NJ)
2015 Flipping Gross Profit: $84,788*
2015 Gross ROI: 98.4%
2015 Median Purchase Price: $86,200
Year Over Year Percent Change: 23%
Hartford – West Hartford – East Hartford (CT)
2015 Flipping Gross Profit: $77,400*
2015 Gross ROI: 79.3%
2015 Median Purchase Price: $97,600
Year Over Year Percent Change: 18%
Miami – Fort Lauderdale – West Palm Beach (FL)
2015 Flipping Gross Profit: $59,700*
2015 Gross ROI: 48.1%
2015 Median Purchase Price: $124,000
Year Over Year Percent Change: 4%
Baltimore – Columbia – Towson (MD)
2015 Flipping Gross Profit: $91,542*
2015 Gross ROI: 84.8%
2015 Median Purchase Price: $107,958
Year Over Year Percent Change: 21%
Washington – Arlington – Alexandria (DC, VA)
2015 Flipping Gross Profit: $96,000*
2015 Gross ROI: 48%
2015 Median Purchase Price: $200,000
Year Over Year Percent Change: 4%
If you’re curious about the potential profitability of a fix and flip project, we’re happy to provide you with a simple to use Deal Economics Calculator. Shoot us an email at firstname.lastname@example.org and one of our team members will send it over. If you’re already satisfied with the economics of your next deal and are ready to pre-qualify for your hard money loan, let’s get to work.
*Gross profit was calculated by subtracting the median price for the first sale (purchase) from the median price of the second sale (flip) in each geography. Gross return on investment was calculated by dividing the gross profit by the median first sale (purchase) price. Gross profit and return on investment do not include property rehabilitation costs.