The huge surge in demand for the higher returns and safety offered by real estate has driven masses of new investment and interest in flipping houses, acquiring REOs to convert to rental properties, and snapping up distressed property notes — but how much are individuals really making?
Big Money from Flipping Houses?
According to a recent report by data compiler RealtyTrac, the national average profit for flipping a house stands at $29,342 for the first half of 2012 (excluding holding costs and repairs). However, this is even higher in some areas like Miami where the number tops $61,000 per deal.
That’s not a shabby payday no matter how you look at it, and ten or so of those days gets you pretty close to a seven-figure salary, less the boss and corporate drama.
Of course the numbers are a little different for those investing in rental homes and distressed property notes. But while they may sometimes offer less cash in the short term they benefit from income and equity.
Are These Returns Sustainable?
According to Inman, in August 2012, “the average price of a foreclosure-related property saw an annual increase in the second quarter: up 7 percent to $170,040.”
At the same time, the National Association of Realtors (NAR) reports “The median existing single-family home price was $188,700 in August, up 10.2 percent from a year ago.”
This appears to reverse the earlier trend leaving even more room for growing profit spreads from flipping REOs.
NAR went on to break down distressed sales saying: “Foreclosures sold for an average discount of 19 percent below market value in August, while short sales were discounted 13 percent.” Though clearly some areas are offering bigger spreads or dollars than others.
Cashing in on the Foreclosure Crisis
Obviously each investor’s returns can vary immensely and a lot depends on the volume of deals and which real estate investing strategy is being deployed; rehabbing and flipping houses versus wholesaling or note-buying, and where properties are acquired from.
Clearly those who know how to use the latest software to target off-market REOs or distressed property notes have a huge advantage over those engaging in bidding wars with the public or spending a bomb on marketing for them.