Let’s start with the basics. Flipping is a term to describe the purchase of an asset that generates profits by renovating and selling it. It can be applied to any asset of value. The term is not alien in the Real Estate sector.
Real estate investors use the term “house flipping” to describe the process of buying, fixing, and selling a house. The house is bought, reconditioned, and sold with a profit margin.
The profits generated by flipping in real estate come in general terms from buying at a low price and selling at a higher price; this is possible in a fast-growing market. Another case is from repairs and improvements that are made to a damaged house. Fix and flip is the term to describe this method.
Flipping houses in south Florida – a decline
Flipping houses in South Florida has been at lower levels in the last 4 years. The availability of discounted houses has decreased, and the increase in house prices has put pressure on house flippers; making a significant profit is no more a guarantee. If the damage to the house is high, it would require a lot of money to repair, which reduces the profit.
If investment costs increase and the supply of discounted houses decreases, it impacts the market for flipping houses in South Florida. This could deteriorate the industry for flipping houses in South Florida. Those who are dedicated to this must be attentive to market trends. The little inventory of available houses causes the prices to rise. The profit margins would low which means that you have to be more careful when buying.
In the last 5 years, house prices have been rising nationwide throughout the United States, registering an average price of $238,000. Although this business is booming, last year, flipping figures fell 4% nationwide. It affected the South Florida area as it fell 3% in the Miami area. This was due to higher prices and lower inventory of properties available for sale.
For this reason, houses at lower prices are selling fast. The outlook indicates that the number of short sales and foreclosure houses has declined. The rising prices have allowed distressed homeowners to sell their homes. They either do that or they risk foreclosure. Miami’s median price for flip has decreased from $373,000 in 2007 to $283,000 in 2015. When a foreclosure appears on the market, you have to move fast. This is because many people are vying for that property. Last year flipping houses sold up to $52,000 more than they bought.
We have seen how the house flipping business has evolved, from just painting to deeper jobs. The goal is that even if the house looks old on the outside, renovation should occur on the inside. This attracts potential buyers. Buyers want to buy in a price range between $100,000 and $250,000. They don’t have the money necessary for repairs. That’s where house flipping investors take advantage.
House flipping is in vogue and it is becoming more competitive as more people seek to enter this type of market. Miami’s metro area had the house flipping activities of any market nationwide. Flipped houses were over 10,000 in number. This represented 8.6 percent of sales in the Miami area.
The advice is to analyze the numbers well before entering the market. Do not fail to assess hidden costs. A narrow margin is a difference between good profit and loss.
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