Usually a strong indication of the viability of house flipping in a market is a return of between 5% and 7%. Parts of Florida, from Orlando to Jacksonville, have been averaging 7% (and up to 20%) returns on home flips. By all accounts, it would seem that savvy investors have discovered that Florida is one of the states with great opportunities for home flippers.
Home Flipping is Coming Back
Last year was the first time in a decade that the number of home flippers in the U.S. began to resemble their pre-recession levels. RealtyTrac reported results of a survey conducted by ATTOM Data Solutions that showed there were nearly 200K homes flipped last year; 20% fewer homes than before the recession but still more than any year since.
Compared to the year before, the gains seem modest, rising only about 3% and only a 0.2% increase in the percentage of single family homes and condos sold from last year to this year. That increase is still the highest since 2014. Home flips made up about 5.5% of home sales last year as opposed to over 8% back in 2006.
Orlando and Jacksonville Flipping Rates Nearing 10%
As the number of flips is rising, the returns for home flippers are coming in well above average. According to ATTOM Data’s report, of the 120 cities surveyed, 10% of them showed profits of more than $100K on average in markets where there were more than 250 homes flipped:
- California – 6 cities saw gross profits between $101K and $145K
- Massachusetts – Only Boston saw profits of over $100K, averaging $140K
- New York – New York City averaged profits of just over $127K
- Washington – Seattle averaged profits of $102K
- Maryland – Baltimore averaged profits of just over $100K
- Washington, D.C. – Averaged profits of $100K
For home flippers in Florida, in cities where there were a million or more residents, homes were flipped at a rate of between 7% and 10% last year. Florida’s metro areas are seeing above average interest from home flippers in several cities including (ranked from highest flipping rate to lowest):
- Tampa-St. Petersburg – 9.9%
- Deltona Beach – 9.9%
- Daytona Beach – 9.9%
- Ormond Beach – 9.9%
- Miami – 8.8%
- Orlando – 8.3%
- Jacksonville – 7.7%
All of those cities are seeing home flipping rates well above 7% however, where there is a limited supply in very expensive communities, flippers are seeing rates above 20%. That includes parts of Miami, Fort Lauderdale, and West Palm Beach. There are several reasons why Florida is such an attractive market for home flippers.
Here are the top 4 reasons:
#1: Supply of Quality Homes is Low
Supply is very low in top tier markets like those found in Fort Lauderdale and West Palm Beach, which can be an attractive opportunity for flippers who are able to secure properties. When the supply of quality homes is low, buyers are often more anxious to move quickly when quality flips become available.
#2: Foreign Investments are Pouring into the Market
American home flippers aren’t the only ones casting their nets in Florida. Foreign buyers are pouring into U.S. markets that are seeing high return rates. While this does increase competition in the market, it’s a good sign of the strength of the market overall.
#3: Secondary and Tertiary Market Flips are Rising in the Face of Limited Inventory
Low inventory in primary housing markets means flippers are looking for other options in secondary and tertiary markets. Because Florida is seeing very limited inventory in several zip codes, flippers are taking advantage of huge discounts for homes averaging over 35 years of age and less than 1500 square feet in size.
#4: Credit is Loosening for Home Flippers
For the last decade credit has been incredibly tight, especially for flippers who in large part had a lot to do with the bubble that burst. Now, there is evidence that banks are easing up, financing nearly a third of all home flips in 2016; more financed purchases than have occurred since 2008.
With the U. S. home flipping marketplace approaching pre-recession levels, Florida has become an attractive market for investors looking for solid rates of return.