Looking at the data from 2015 and the expected trends for 2016, it looks like this year will be an interesting one for house flippers. While house flippers are still making excellent profits in markets like San Francisco, Los Angeles, and San Diego, the total number of flips is going down. In the second quarter of 2015, only 4.5% of all home sales were flips, and the numbers have been steadily decreasing from there. A large reason for this is that the number of foreclosed homes on the market is quite low. Only about 40% of flips in the second quarter of 2015 were of distressed properties. That’s the lowest number since 2007.
As a result, people who only focus on low-end house flips are not doing particularly well in this marketplace. In fact, low-end flips are experiencing the lowest ROIs, as it is very difficult in this market to get a low-end house for below market value.
That said, there are still excellent profits to be made at the high end of the market. Luxury flips tend to take more time and be quite competitive, but professional flippers who have the resources and energy are able to make profits between 20% and 33% on high-end house flips.
In 2016, prices are expected to rise another 3% nationally, and that figure should be higher in hot marketplaces. Flippers who will do best in 2016 are those who do their research, collaborate with strong teams, and maintain reasonable expectations. For example, you simply can expect to find a house for 20% below market value these days. But if you put in the time and energy, you can find an undervalued home in an up-and-coming neighborhood that, with the right renovations, will be extremely appealing to millennial buyers.
In 2016, you shouldn’t expect to churn out as many house flips as years past. Instead, each flip will require personalized planning and execution.
Success will also require the support of a strong private money lender. Here at ZINC Financial, we offer house flipping loans suitable for everything from low-end flips to luxury investments. All of our residential rehab loans are funded within seven to ten business days, and we can offer you the resources and guidance that come with successfully working in this industry year after year.
Give us a call at 559.326.2509 to learn more, and remember to ask about our current cruise promotion.