I have never been a fan of the term, “flipping”. However, it has become a term of art so it is here to stay. Negative connotations have been associated with the term but there is nothing wrong with buying a home and selling it for a profit. The lenders and servicing agent are (presumably) smart folks and iof they agree to a price, then it is a fair deal!!
According to RealtyTrac, house flipping is up 19% from a year ago, and a whopping 74% from the first half of 2011. That’s a great sign for the real estate markets, but why are investors choosing now to get back into the flipping game, and where are the prime cities to consider flipping? This statistic surprises me because it has become increasingly difficult to buy a short sale and sell it for a profit.
The gross profit that many investors enjoy from flipping single-family homes is $20,000, according to Yahoo! Finance. Naturally, this number varies widely depending on the size and condition of the unit as well at demand for homes in the city where the home exists.
It seems Florida is a prime location for successful home flippers. In fact, in the Daytona Beach area, year-over-year flips are up 111%, with the average purchase price at $63,000, and gross profit percentage of 82%. Again, these are gross profits. Investors always need to consider the tax implications of profit from a real estate transaction, as they can be significant, both at the federal and state level.
So, it appears that “flipping” is here to stay and perhaps this is not a bad thing. Investors represent a significant portion of the buyers in the market and they are helping to fuel the housing recovery. This is especially true when you consider that when an investor purchases a home, it will soon be on the market again and this benefits everyone.
Paddy Deighan J.D. Ph.d
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