The Right Time
Knowing the right time to launch a house flipping business can be difficult, but recent research could help assure budding entrepreneurs that 2019 is still favorable to get started. The recent report by AttomData, covered in Realtor Magazine, indicates that US house flipping rates have reached a nine-year high in the first part of 2019. But how do you know if 2019 is a good time to start a house flipping business of your own? Let’s consider the averages, flipping rates and supply to further delve into the answer to this question!
Taking a look at the numbers for 2019 so far, nearly 50,000 houses were flipped during quarter one, representative of about 7% of all first quarter home sales. These home flips sold at an average gross profit of $60,000, a slight decrease from the $62,000 average of the previous quarter, yielding an average gross profit of 38.7% ROI. This could be due to the level of competition and some general fears regarding market softening.
However, these decreases are not deterring everyone, and many investors are still finding valuable opportunities with the potential to bring good profits in the next six months.
Home Flipping Rates
A total of 62% of metropolitan areas surveyed for this research report showed a significant year-over-year increase in home flipping rates. The collective dollar volume of these home flips has reached $6.4 billion, a whopping 35% increase from the same time period a year earlier. This total is the highest it has been for twelve years, showing how active the flipping scene has become.
The aggregate of these homes purchased by an investor specifically using financing represented an estimated 37% of the total homes flipped in Q1, down 2% from the previous quarter. However, house flipping lending volumes have increased to a twelve year high of 35%. Investors may be using alternate financing to flip their property, but the overall lending rates are showing growth.
A competitive environment like this one is driving investors to look for profitable investments in new ways to outperform their peers.
Real Estate Supply And Prices
The majority of the homes flipped during Q1 in 2019 took an estimated 180 days to complete, an increase of only five days compared to numbers from the previous quarter. Despite increasing flipping rates, overall gross profits and ROI have shown some weakening, and the total number of investors who are actively flipping has decreased.
Another important factor is that the supply of real estate properties has also decreased, particularly in more popular metropolitan areas. Home prices are predicted to see even more increases in 2019, posing a significant challenge for investors looking to pick up properties for less. In fact, property price increases should be viewed positively- if the supply doesn’t keep up with the demand, other properties that are currently being flipped can be sold for a higher asking price.
These results may seem confusing with fluctuating numbers, but real estate flipping continues to bring above-average returns to investors and to be a fairly stable investment. The most important factors for a successful real estate business continue to be a successful combination of timing and location.
Property investors are advised to keep away from areas with rising prices, and to instead turn to emerging markets for new flipping opportunities. Although off the beaten path, these opportunities could offer big returns with the right amount of work and a good eye. Overall predictions for the 2019 US housing market have also highlighted suburban neighborhoods nearby to sought-after amenities such as good schools and public transportation as areas of great potential for investors.
House flipping rates have reached a nine-year high in the first quarter of 2019, with nearly 50,000 single-family residences flipped in the first quarter of the year. These home flips sold at an average gross profit of $60,000, and 62% of metropolitan areas surveyed for this research report showed a year-over-year increase in home flipping rates. The supply of real estate properties has decreased, and prices are set to increase and become more competitive as a consequence. Assessing these three factors – 2019 is still a good time to start a flipping business, and continues to bring good returns to investors who know the market.