US Home Flipping Hits 6 Year High (New Report)

Homes flipped in Q2 2016 accounted for 5.5 percent of all single family and condo sales during the quarter, down from 6.7 percent of all sales in the first quarter but up from 5.4 percent of all sales in Q2 2015.

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For the report, a home flip is defined as a property that is sold in an arms-length sale for the second time within a 12-month period based on publicly recorded sales deed data collected by ATTOM Data Solutions in more than 950 counties accounting for more than 80 percent of the U.S. population (see full methodology below).

A total of 39,775 investors (including both individuals and institutions) completed at least one home flip in Q2 2016, the highest number of home flippers since Q2 2007 — a nine-year high.

“We’re starting to see home flipping hit some milestones not seen since prior to the financial crisis, which is somewhat concerning, but there are a couple of important differences in the home flipping of 2016 compared to 2006 when home flipping peaked during the last housing boom,” Realtytrac’s Blomquist says.

“First, home flippers are realizing a much bigger gross ROI in 2016, averaging 49 percent in the first two quarters compared to an average gross ROI of just 27 percent in 2006. Second, while an increasing number of flippers are financing their purchases, more than two-thirds are still using cash to purchase compared to about one-third using cash to purchase back in 2006.”

Of the 51,434 homes flipped in the second quarter, 68.3 percent were purchased with cash by the flipper, down from 71.1 percent in the previous quarter and down from 69.6 percent in Q2 2015 to the lowest level since Q3 2008 — a nearly eight-year low.

infographic_homeflip“In today’s single family real estate sector there is more institutional capital, which means that more financing is available and more attractive for real estate investors,” said Varun V. Pathria, CEO at AssetAvenue, a company that provides investor rehab, bridge and rental loans.  “The real estate entrepreneurs that AssetAvenue serves are not only looking for the availability of cash, but are also looking for financing that is simple, quick and reliable, which we deliver.”

Pathria noted that 79 percent of the rehab loans AssetAvenue has originated so far in 2016 have been purchase loans while the remaining 21 percent have been refinance — typically an investor who purchases with cash at a foreclosure auction or some other auction and subsequently finances the property.

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Gross flipping profit increases to new all-time high

Homes flipped in Q2 2016 sold on average for $189,000, $62,000 more than the average purchase price of $127,000, according to ATTOM data. That $62,000 average gross profit was up from an average $59,250 gross flipping profit in the previous quarter and up from an average $57,900 gross flipping profit in Q2 2015 to the highest average gross flipping profit since Q1 2000, the earliest quarter tracked in the report.

The average loan amount for rehab loans originated by AssetAvenue so far in 2016 was $193,786, according to CEO Pathria.

The $62,000 average gross flipping profit represented an average 48.8 percent return on the original purchase price, down from a 49.3 percent average gross flipping ROI in the previous quarter but up from a 47.5 percent average gross flipping ROI in Q2 2015.

Average days to flip at 10-year high

Homes flipped in Q2 2016 took an average of 185 days to flip, up from 180 days from the previous quarter and up from 182 days in Q2 2015 to the highest level since Q2 2006 — a 10-year high.

Among 100 metropolitan statistical areas with at least 90 home flips in Q2 2016, those with the longest average time to flip were Ogden-Clearfield, Utah (229 days); Naples, Florida (222 days); Punta Gorda, Florida (212 days); Palm Bay-Melbourne-Titusville, Florida (206 days); and Pensacola, Florida (206 days).

Markets with highest home flipping rate

Among 100 metropolitan statistical areas with at least 90 homes flipped in Q2 2016, those with the highest flipping rate were Memphis (11.1 percent); Visalia-Porterville, California (10.1 percent), Tampa (10.0 percent); York-Hanover, Pennsylvania (9.7 percent); and Mobile, Alabama (9.6 percent).

Other metro areas in the top 10 for the highest flipping rate in Q2 2016 were Fresno, California (9.5 percent); Lakeland-Winter Haven, Florida (9.5 percent); Deltona-Daytona Beach-Ormond Beach, Florida (9.4 percent); Clarksville, Tennessee (9.3 percent); and Miami (8.6 percent).

Along with Memphis and Tampa, major markets with a population of at least 1 million where the Q2 2016 flipping rate was above 7 percent were Miami, Orlando, Baltimore, New Orleans, Phoenix, Jacksonville, Florida, Nashville, and Las Vegas.

Markets with highest gross flipping profits

shutterstock_179346260-2Among the 100 metropolitan statistical areas with at least 90 home flips in Q2 2016, those with the highest gross ROI for homes flipped in Q2 2016 were Pittsburgh (133.3 percent), Allentown, Pennsylvania (117.9 percent); New Orleans (111.5 percent); Cleveland (102.6 percent); and Philadelphia (98.9 percent).

There were nine metro areas where the average gross flipping profit in Q2 2016 was more than $100,000: San Jose, California ($161,000); San Francisco ($146,000); Los Angeles ($125,000); New York ($124,160); San Diego ($111,250); Oxnard-Thousand Oaks-Ventura, California ($110,000); Baltimore ($105,000); Washington, D.C. ($104,500); and Seattle ($102,900).

“While the number of home flips is up moderately on an annual basis, this segment of the market is still a relatively small share of the overall market in the Seattle area,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. “As we head into 2017, I believe Seattle may see a slowdown in flips due to our very limited supply of homes and the high prices buyers are willing to pay, regardless of the quality of the home. Moreover, while I expect inventory levels to increase in the coming year, I believe that will actually serve to slow overall price growth and take some of the steam out of the flipping market.”

Other high-level takeaways

  • Thirty-five percent of all homes flipped in Q2 2016 were sold by the flipper for between $100,000 and $200,000, the biggest share of any price range, but the biggest year-over-year increase in terms of price range was homes flipped in the $200,000 to $300,000 range – up 10 percent from a year ago.
  • Homes flipped for more than $5 million yielded the highest average gross ROI (73 percent), followed by the $50,000 to $100,000 price range (58 percent) and the $100,000 to $200,000 price range (58 percent).
  • Homes that were flipped in Q2 2016 were purchased by the flipper at a 25.7 percent discount below full “after repair” market value on average and sold by the flipper for a 9.2 percent premium above market value on average.

 

(http://www.realtytrac.com/news/home-prices-and-sales/q2-2016-u-s-home-flipping-report/)

 

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Overcoming Fear, Signing the Contract, & Closing My First Deal. {Investor Files}

“There I was — palms sweating, shaking, sick to my stomach. I was 23 years old and about to complete the highest dollar transaction of my life; a whopping $89k for an investment property in Tampa, Florida.”

 

Matt Andrews talks about overcoming fear, signing his first real estate contract, and closing his first property deal. 

 

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Maybe you’re just like me. I went to school, studied hard, and got good enough grades to get into a decent college. Once there, I worked hard to graduate with a degree that I was told would get me a “good job”. Shortly after graduating, at 21 years old, I landed a coveted sales position at one of the largest companies in the country. They were the leader in their industry. I came out of the gate fast and achieved quick success.

My first year with the company I was awarded “Rookie of the Year” honors for my region. I was given expense accounts, com- pany cars, 401k plans, and various other perks. I was given special attention and put on the corporate fast-track. All signs pointed to a long successful career and my superiors encouraged me to pursue the highest levels within the company.

The-Firm-Tom-Cruise-www.whysoblu.com_They told me I would have a long and successful future with the company. Sounds a little bit like a John Grisham novel, doesn’t it? Fortunately, I was not asked to kill anybody, buy off a jury, or commit fraud. But I was, however, asked to put in long hours, work tirelessly, and give up a lot of personal freedom for the benefit of “the firm”. I bought into it though, because I believed that I would eventually achieve a certain status in which I could have that freedom and all of my dreams would come true. But something happened to me over the course of the next year that started changing my perception of where my current path would take me.

As I began to spend more time with upper-level management in the company, I started to get a look behind the curtain. I saw previous “Rookies of the Year”. I began to observe the lives and work of the corporate stars. These people represented where I would be in 10, 20, or 30 years with this company.

I saw people who were 30 years in and still drastically overworked. People who bought into the system, put their heads down, and hoped for the best. People who had no freedom. People who had money, but no time to enjoy it. People who had families that they loved, but never saw. People who tried to cram a year of fun into a paltry two-week vacation each year. People who were given recognition and awards, but no control of their lives. People who were burnt out both physically and emotionally. Always thinking that the next year would be better than the last. That soon they would get what they deserved.

perder-un-clienteSuddenly the message they were sending me was coming in loud and clear. It was like they were saying, “Hey Matt, would you like to give us the best years of your life, work like a dog, lose your physical and mental health, never see your family, chase an imaginary carrot, and then retire when you’re too old and crusty to enjoy your retirement?”

“Yes please. Where do I sign up?” I thought sarcastically.

It was at this time that I also read the book that impacted me more than any other book in my life (except the Bible). That book was Rich Dad Poor Dad by: Robert Kiyosaki. Warning: If you read this book you will no longer be satisfied in corporate America. Read with caution, because you can’t go back! If you haven’t read it, you need to read it ASAP. It will shape the way that you perceive money, time, and life in general. After my book, it should be the next one on your list. I credit Mr. Kiyosaki with opening my mind to the possibilities at a crucial time in my life. Without it, I would not be where I am today.

After recognizing the signs from my co-workers and superiors and reading Rich Dad Poor Dad, it became impossible for me to be satisfied with my current path. For the first time I realized that I bought into the big lie: study hard, go to a good school, get a good job, retire rich, and ride off into the sunset. I now knew that this path was a sham, a pipe dream, a dead end. I could not go back to my old way of thinking now. I was essentially ruined for corporate America. Fast forward a bit to a pivotal moment. . .

There I was — palms sweating, shaking, sick to my stomach. I was 23 years old and about to complete the highest dollar transaction of my life; a whopping $89k for an investment property in Tampa, Florida.

I had done the research. I knew I was paying the right price. I knew what the renovations would cost. I knew what I could sell it for and what kind of profit I could make. But all that knowledge didn’t matter right now. It was time to go “all in”; put pen to paper. Time to officially become a real estate investor . . . and I was having second thoughts.

Until this point, everything was a course in a book, a training video, an intangible theory about real estate investing. But this . . . this was different. This was the real thing and I was scared. What happens if something goes wrong? What if my renovation numbers are wrong? What if I can’t sell for what I think I can? What if I lose my life savings? What if the people that told me not to quit my day job and followapipedreamwereright?Whatif. . . whatif. . . whatif.

When faced with fear and trepidation like this, there are really only two choices. “There are two things I can do in this situation,” I thought to myself, “I can nix the whole deal, play it safe, keep my meager savings, be content with the income I get from my day job and retire in 40 years. There’s no shame in that, right? It’s what I was taught to do by my teachers in grade school. It’s the plan that was set up by my college professors. It’s what most people do and how most people live. Maybe I should just subscribe to the status quo and not rock the boat. Maybe I should not take this risk and just play it safe. Sure, I will need to downsize my life goals. I will need to learn to live with less than the ideal. I will need to postpone that freedom I was longing for until my 60’s or later.”

“Or, I can press forward with the plan, embrace my inner entrepreneur, and achieve freedom. I can work smarter instead of harder. I can reject the antiquat- ed ways of traditional business, pull off the tie and join the new rich. I can decide that nothing is impossible, go after my dreams, and achieve lasting fulfillment.”

Group of people raising hands to answer a question

 

Our lives are comprised of the choices that we make and this was my biggest financial “choice” to date. Suddenly, a sense of calm came over me, I was no lon- ger nervous, the butterflies in my stomach went away; I was at peace. My mouth creased up slightly in a kind of half smile that said “I got this.” I leaned forward in my seat, whispered, “Let’s do this,” and signed the papers. Since that day, I have never looked back. Over the next decade, I have gone on to buy, sell, renovate, and rent hundreds of homes. Along with my wife Lindsay, we have built a successful investment company that works with smart investors all over the world.

I have never regretted my decision to take that “leap of faith” and now I have a strong desire to help others do the same thing. Now go out and create your story!  – Matt Andrews

 

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Real Estate Investor, and friend to the Real Estate Freedom community, Rob Swanson just released a training video that goes through a probate investing scenario, step-by-step.

In this video you’ll learn:

Learn how to get probate leads that no one knows about by getting the houses released from the probate early — the families will love you. SEE THE FULL TRAINING VIDEO HERE!

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Why do 97.4% of Real Estate Investors FAIL?

This new video by Matt Andrews reveals why most Investors are dead before they complete their first flip and how you can insure that you are one of the 2.6% who profit on EVERY DEAL. The Secret is… SEE THE VIDEO HERE

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House Flipping Reaches All-time High In These 7 Markets (See the Full List)

After cooling off in 2014, home flipping is on the rise again — its share of all home sales is up 20 percent in the first three months of this year from the previous quarter and up 3 percent from the same period a year ago, according to a new report from RealtyTrac, which defines a flip as a property bought and resold within a 12-month period…

 

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While flipping today is nothing like it was during the housing boom a decade ago, when investors used risky mortgages, it is reaching new peaks in 7 percent of the nation’s metro markets, including Baltimore, Buffalo, New Orleans, San Diego and even pricey Seattle.

“While responsible home flipping is helpful for a housing market, excessive and irresponsible flipping activity can contribute to a home price pressure cooker that overheats a housing market, and we are starting to see evidence of that pressure cooker environment in a handful of markets,” said Daren Blomquist, senior vice president at RealtyTrac.

shutterstock_162580445That’s because flippers today largely use cash — 71 percent did in the first quarter of this year. Compare that to just 27 percent who used cash at the height of the housing boom. That helps keep most flippers conservative, but it also exacerbates the problems for entry-level homebuyers, who simply can’t compete against all-cash buyers.

Usually flippers look for distressed properties either in the foreclosure process or already bank-owned. These are not always listed on public sale sites. There are fewer of those today, so flippers are moving to the mainstream market, creating that new pressure.

“A telltale sign is when flippers are acquiring properties at or close to full market value. Those markets are so competitive that even the off-market properties flippers are looking to buy are not selling at much of a discount — and there may be very few distressed properties available,” said Blomquist.

Examples of these markets include San Antonio, where Blomquist says flippers are actually purchasing at a 7.8 percent premium above estimated full market value, as well as Austin, Texas; Salt Lake City; Naples, Florida; Dallas and San Jose, California.

Despite the premium to buy, flippers are still seeing growing gains in profit. Home flippers realized an average gross profit of more than $58,000 in the first quarter of this year, the highest since the third quarter of 2005, according to RealtyTrac.

 

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The lack of inventory is certainly a double-edged sword for flippers. Their initial investment price can be high, and flippers are often competing against local builders, who may want to tear the house down and put something up that is twice the size. On the other hand, not everyone wants or can afford a huge, new, expensive home, and that gives flippers the edge.

“The key here is that there is particularly a dearth of listed inventory in good condition,” said Blomquist. “That is the inventory flippers are competing against when they sell.”

(http://www.cnbc.com/2016/06/02/house-flipping-heats-up-creating-home-price-pressure-cooker.html)

 

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Blackstone Buys $1.8 Billion In Property From Alecta (Check out these numbers!)

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Blackstone Group LP is in a $1.8 billion deal to buy the U.S. real estate assets of Alecta, the Swedish pension manager that is seeking to exit investments that don’t fit with its strategy, according to a person with knowledge of the transaction.

 

The purchase mainly consists of retail and office properties, said the person, who asked not to be identified because the deal is private. They include Lakeshore Plaza, a shopping center in San Francisco’s Sunset District; the Shops at La Jolla Village, a retail area in the affluent San Diego suburb; and 815 Connecticut Ave. NW in Washington, an office building near the White House.

bstoneAlecta manages about 721 billion Swedish kronor ($85 billion) in pension assets. The company hired Jones Lang LaSalle Inc. earlier this year to sell a portfolio of 48 office, retail, apartment and industrial properties in the U.S. and U.K., according to an April 6 press release from the brokerage.

“Our foreign operations have been extremely successful in consistently generating above-average returns, but they have always been a bit of an organizational anomaly in our streamlined business, which prioritizes economies of scale within our investment strategy,” Per Frennberg, chief investment officer of Alecta, said in the April statement. “The current strong demand for global real estate offers a good opportunity for us to take another step in our development towards our vision, to be the most efficient occupational pension fund in the world.”

Blackstone is the world’s largest private equity real estate investor, with more than $100 billion of investor capital under management.

 (http://www.bloomberg.com/news/articles/2016-08-26/blackstone-said-to-buy-alecta-s-u-s-properties-for-1-8-billion)

 

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