Higher home costs are making house flipping more difficult, but profitable.
Generally, flipping is defined as purchasing and selling a home in the same year. This is popular during the booming market of the housing business, when investors could get mortgage financing easy. Now that they need money and as lower-cost, distressed housing dry up, they need more for financing.
"Despite the rise in flipping returns in the second quarter, home flippers should proceed with caution in the next six to 12 months as home price appreciation slows and a possible interest rate increase could shrink the pool of prospective buyers for fix-and-flip homes," said Realtytrac's Vice President Daren Blomquist.
Christopher Harrison's home is in an expensive community with high-end schools. He invested $400,000 in the property which he bought for almost $700,000. He then expanded the size into a 1,800 square foot bungalow, and enlisted it in July for more than $1.5 million. He has lessened the cost by $54,000, and is thinking to do more work to the property, likely to be adding a parking slot, based on a report by CNBC.
Home prices have also flattened in Washington D.C., where flipping is a good business.
Based on the report of Toledo Blade, there were 64 properties sold in the month of April until June this year, as compared to only 41 for the similar period in 2014. The usual profits on those home flips in the area were $29,549 for the metro Toledo buys, or the investor's percentage gains from the bought investment amount and price, went down from 2014's 55.0 percent to 35.5 percent this year.
During the second quarter of 2015, home flips sold around 4.5 percent as compared to 4.9 percent last year. Flipping profits, on the other hand, went up from 24 percent in 2014 to 36 percent this year.
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