It was only within the past two weeks when we reported that home flips across the United States are up by 19% on an annual basis. This display also showed home flips to be up by an even more impressive 74% since the first half of 2011. With all of this optimism, it appears to be quite evident that investors nationwide have discovered that it is quite the optimal time now to purchase properties hopefully slightly at a bargain to then convert and improve their spaces before once again placing the home on the market for sale.
Well, it is not just the lower to middle priced segment of the market where all of the successful home flips are coming from. In fact, the luxury market has seen a great deal of activity as of late with many investors turning to money lenders if they are unable to secure such short-term, quick financing from a bank.
So what exactly determines whether a transaction can be considered a home flip or not? If a property is bought and sold within six months, this is considered a home flip. According to RealtyTrac, between 2011 and today in this country, there has been a 40% boost in home flips of properties valued at over $1 Million; thus considered luxury.
With larger sums of money it results in a greater risk as well. Daren Blomquist, the Vice President of RealtyTrac, came forward to comment that, It's 10 times as risky doing high-end flips. Unfortunately what happens a lot of times, flippers have a property, then they can't find a buyer to purchase it." However, despite this potential trepidation individuals might have, their overall faith in the market is so firm that home flips continue to dramatically climb, as Blomquist went on to state, "Flippers are getting more confident that the market is really recovering, and therefore are more willing to go high-end, even though it's more risky." The flourishing stock market is one major contributor to more investors being willing and able to enter the house flipping business. The vast amount of cash that is out there is being met with the strong force of demand for property seen throughout the country due to prices having not yet hit their peak and interest rates still being rather low.
As also reported in a past blog, foreign investors, especially the Chinese, are flocking to purchase real estate in the United States at levels previously unseen. Chinese purchasers, who now represent the second highest investment pool in U.S. property behind Canada, see the housing industry here on our local level far more safe of an investment where large gains can be made upon a house flip. In 2012 alone, Chinese purchasers spent upwards of $12 Billion on American real estate, this statistic from the National Association of Realtors.
With a luxury home, one would think that there is not too much that can be done to improve the overall state of the property. Ultimately, what it comes down to is simply bringing everything to todays time in terms of technology, comfortability, and often giving it a needed contemporary flare. A private money lender, Jan Brzeski, notes that, "Almost all our homes in these A and A-plus neighborhoods have something in common. You look at the appliances in the kitchen. If they are from the 1960s or 1970s, that's the house to flip." Furthermore, Realtor Mark Black has been astonished at just how successful house flips have been as of late when he mentioned, "The market has gone through the roof. You see people buying properties one year ago and selling them at 20, 30 percent profit. Some of these are no more than paint jobs. The ones that are doing big rehabs are making huge profits." With sheer optimism being shown regardless of price point, the future prospects for the real estate industry continue to look bright. Whether looking to buy and then flip a house at a gain or whether purchasing today as a wise long-term investment for tomorrow, the many facets of the real estate market are all headed in the right direction.
More Information: Reuters