Business of flipping houses building up steam again

Wednesday, October 17th, 2012 By

Roofing

Flipping houses, formerly a big industry for a lot of people, is starting to make a comeback. Image from Wikimedia Commons.

Remember the flipping houses boom before the recession hit, where a lot of people turned over run-down homes and sold them? It’s making a bit of a comeback lately, as investors were able to grab a lot of houses for dirt cheap and now are starting to see a bit of a payoff.

Flipping houses not just for reality television

Prior to the housing market imploding and a recession starting, a lot of people turned to flipping houses. Obviously it was a good idea when people actually were buying houses and there was a profit to be made but since then, it hasn’t been as lucrative.

Flipping a house is one of the few ways a person can make money on houses. The typical house doesn’t make much, as most people don’t include the costs of maintenance, repairs or improvements, insurance, taxes or closing costs, as much as just comparing the purchase and sales prices. If one can get a house bought and flipped for less than they sell it for, the potential is there.

However, the formerly-popular house flipping industry, according to the Washington Post. RealtyTrac, the real estate website, reports a 25 percent increase in the first half of this year over the same period last year.

Gaining steam

Oddly enough, the leading area for flipping houses in RealtyTrac’s data is Phoenix, Ariz., one of the hardest-hit states in the real estate slump, with almost 10,000 flips. Arizona, along with Nevada, Florida and California were especially affected, as real estate values were drastically inflated in those areas.

However, some of the worst-hit cities are flipping hotbeds. Other areas with increased activities include Los Angeles, Las Vegas, Miami and Atlanta, all cities that were hit with massive foreclosures and plummeting values. According to the Chicago Tribune, it’s begun picking up in the Windy City as well. There have been 1,067 flips there so far this year, a 30 percent increase. Overall, almost 100,000 homes have been turned over for sale nationwide.

Not as easy as it looks

Flipping houses seems simple, but it isn’t just putting in a few new cabinets and cash rains from the sky. Many properties are foreclosures, according to CNBC, which have been sitting for sometime and need to be rehabbed to be inhabitable, which can be expensive. Researching each house is paramount and interested people need to take their time to find a house to flip that will be worth it, financially.

According to MSN, getting a flippable property with no money down isn’t likely to happen and definitely don’t expect realtors to have inventory that fits the bill. Auctions aren’t always going to have many either.

Don’t be seduced by reports of wild amounts of money either. The Washington Post astutely points out that RealtyTrac reported a $29,432 gross profit per flip, which is just the difference between purchase and sale price; it doesn’t account for flipping costs. RealtyTrac did not report net profit, or profit after overhead. Making friends with contractors is also a good idea, as a person who doesn’t know how to plumb, wire or find a wall stud is going to find themselves over their head in a hurry.

Sources

Washington Post

Chicago Tribune

CNBC

MSN: http://realestate.msn.com/article.aspx?cp-documentid=13107725

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