Flipping Is Still Popular

Research shows that flipping is still a popular strategy. Auction.com findings for the first quarter of this year reveal a 6.5 percent quarter-over-quarter increase in favor of flipping overall. However, investor intent varies considerably by the type of auction (live event versus online auction) and by investor profile. Survey respondents who indicated that they were making a one-time purchase still preferred a hold-to-rent strategy, while respondents identifying themselves as full-time “real estate investors” and those indicating that they were working on behalf of another investor favored flipping.

“It seems clear that the unusually low inventory of homes for sale has led to higher home prices, which makes it challenging for investors to rent homes out at a rate that’s profitable, and still affordable for tenants,” said Auction.com Executive Vice President Rick Sharga. “So in states like California, Washington, Nevada and Arizona a large number of investors have decided that the best opportunity today is to meet the demand of prospective homeowners by buying, fixing and re-selling investment properties.”

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Investors bidding at live events appear to be more likely to flip the properties they purchase based on survey responses collected in the first quarter of 2015, with respondents indicating a preference toward flipping over holding to rent in every state where Auction.com conducted live events. Of the states represented in the survey, the widest margins occurred in the West and Midwest.

Conversely, responses given at online auctions in the first quarter of 2015 show that investors bidding online in every region are more likely to hold the properties they purchase. This preference has increased slightly from the previous quarter for every region except the South, which instead saw a 9.5 percent quarter-over-quarter increase in flipping intent.

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Less active investors (those indicating that they purchase one or fewer properties per year) demonstrated a preference for renting properties, while flipping was prevalent among investors who purchase multiple properties per year. Investors indicating that they purchase between two and 49 properties per year showed a growing interest in flipping, up 7.4 percent from the previous quarter. “Historically, individual investors have owned over 95 percent of the single family homes available for rent,” Sharga noted. “It looks like these investors are coming back to the market, and filling a growing market need for rental units.”

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