Pending home sales rose 3.4% in April to the highest level since May 2006. The home builder sentiment bounced back after dipping in March and housing starts jumped 20% in April from March. Home prices also rose more than expected in March; the S&P/Case-Shiller index gained 5% year-over-year in 20 cities.
Housing’s brightening outlook is welcome news, not just for homeowners but also for home flippers, said Nav Athwal, the CEO of Realty Shares, an online real estate investment marketplace. “Markets like Tampa, Miami, Jacksonville and Orlando present opportunities in terms of both available supply for flipping and also large returns…and we’ll see this trend continue,” said Athwal.
According to RealtyTrac, 4% of all single family home sales in this country in the first quarter were flips. Florida dominated the list for top markets for home flipping. But when it came to making a profit, flippers in the Baltimore area saw a whopping 94% return. “Markets like Baltimore have less supply, thus profit margins push up. Another similar market is Memphis, there’s not a lot of supply in the market, so the home flippers that successfully acquire the supply are better able to flip a profit better,” said Athwal.
But with home price appreciation slowing, is this a better time for buy-and-hold investors than flippers? Athwal pointed back to the old adage that what matters most in real estate is location. “The strategy that’s going to lead to the most success, profit, depends on what city, what zip code you’re focused on,” he said. “If you look at markets like Florida and Detroit, because there’s still ability to buy ‘right’, which is key to a successful flip, they’re great markets for flipping but if you turn to other markets, where profit potential for flips isn’t as high but where you can buy a house for cheap and rent it for $1,000, $1,500 and get a double-digit yield, then you have to turn to a buy and hold strategy.”
This formula for flipping makes Florida unique in Athwal’s assessment. “In markets like Tampa, Jacksonville, you can be successful both with the ‘buy and hold’ as well as the flip strategies but it’s really going to depend on the market’s economics to determine what the best strategy is there,” he said.