Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

5 Tips to Flip a Home in the Post-Bubble Market

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

5 Tips to Flip a Home in the Post-Bubble Market

Article excerpt

Flipping is back. That may sound surprising for homeowners who saw their equity evaporate in the recent housing crisis.

But data show that house flippers -- buyers who purchase a home and then resell it within six months -- are returning to the market.

Flipped homes accounted for 4.6 percent of all U.S. single- family home sales in 2013, up from 4.2 percent in 2012 and 2.6 percent in 2011, according to data from RealtyTrac.

Foreclosures have driven that trend. But increasingly, non- distressed properties are also ripe for house flipping.

"Strong home price appreciation in many markets boosted profits for flippers in 2013, despite a shrinking inventory of lower-priced foreclosure homes," says Daren Blomquist, vice president of RealtyTrac.

"For the year, 21 percent of all properties flipped were purchased out of foreclosure, but that is down from 27 percent in 2012 and 32 percent in 2011. Investors are finding discounted buying opportunities outside of the public foreclosure process."

But while there are house-flipping opportunities to be had, experienced flippers say profit isn't as easy to come by as it was during the bubble years.

And in the aftermath of the crisis, many say they've learned valuable lessons:

* Not all markets are the same. You can flip in just about any market, but you'd be mistaken if you think all markets are the same, said Bob Gordon, a broker with RE/MAX Alliance in Boulder, Colo.

"You need to know your market," he said. "In San Francisco or New York City, where prices are sky-high, flippers need to understand that they're purchasing an expensive property, so having deep pockets is necessary. In Minnesota or Arizona, values are much lower, but flippers need to know that there is a lot of inventory and margins are so tight."

In one sense, that's nothing new. But what's different from the bubble years and the immediate aftermath is that we're no longer caught up in a national housing picture in which cheap loans inflate prices across the board.

These days, flippers can find properties that are likely to increase in value over six months of rehabbing, but it's unrealistic to expect that kind of growth everywhere.

* Make full-price offers. Like any investment, successful house flipping hinges on buying low and selling high. But while the past few years may have seen opportunities to buy at deep discounts, today's flippers might have to pay full price.

But according to Mr. Gordon, full-price offers aren't necessarily bad for flippers. The key, he says, is to be aggressive and do your homework.

"Full-price cash sounds great to the seller," he said. "But next comes a very detailed inspection. The investor has locked up the home for 10 days and can now use the inspection to come after the seller for funds."

According to Mr. …

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