Flip/Flipping

Flip/Flipping: Buying a home and then reselling it for a profit.

Flip/Flipping: A real estate investment strategy in which an investor buys property with the intention of reselling it for a profit. Profit is the result of price appreciation due to a growing housing market and/or from renovations and capital improvements.

House Flipping: Reselling Foreclosed Homes for a Profit

House flipping is when real estate investors purchase homes, usually at foreclosure auctions, and then resell them at a profit. It can be a risky investment since real estate markets fluctuate, though it has proven successful for many.

According to Matt Rodak, CEO at Fund That Flip, Inc., “A “flip” is defined as a property that sells in an arms-length transaction for the second time within 12 months. These types of transactions accounted for 6.7% of all homes sold in Q1 of 2017. Across all markets, flippers averaged a $64,284 gross profit.”

Flipping homes tends to be popular during economically stable times, though experts warn that a frenzy for flipping could lead to a housing bubble, with some even blaming the 2007 subprime mortgage crisis on house flippers.

From 2002 to 2006, “areas with high house price growth saw a significant increase in flipped properties—that is, an increase in the velocity with which properties turned over. This increase in the number of transactions as a response to increased house prices means that a larger fraction of households held recently originated mortgages and thus were near or at their maximum leverage level,” say Manuel Adelino, Antoinette Schoar and Felipe Severino in their study Loan Originations and Defaults in the Mortgage Crisis: The Role of the Middle Class.

Despite its popularity, house flipping, which has been spurred by reality shows that show the upside of renovating and reselling homes, has also been shunned by some who learned their lesson the last time around, realizing that profits aren’t as easy to come by as they were during the bubble years.

“We think it’s a little bit different this time because we think more flips are actually value-added improvements that investors are making to the house, rather than speculative flips which is basically someone buying and sitting on a home waiting for the prices to rise,” says Trulia’s Chief Economist Ralph McLaughlin.

Flip/Flipping

Flip/Flipping: Buying a home and then reselling it for a profit.

Flip/Flipping: A real estate investment strategy in which an investor buys property with the intention of reselling it for a profit. Profit is the result of price appreciation due to a growing housing market and/or from renovations and capital improvements.

House Flipping: Reselling Foreclosed Homes for a Profit

House flipping is when real estate investors purchase homes, usually at foreclosure auctions, and then resell them at a profit. It can be a risky investment since real estate markets fluctuate, though it has proven successful for many.

According to Matt Rodak, CEO at Fund That Flip, Inc., “A “flip” is defined as a property that sells in an arms-length transaction for the second time within 12 months. These types of transactions accounted for 6.7% of all homes sold in Q1 of 2017. Across all markets, flippers averaged a $64,284 gross profit.”

Flipping homes tends to be popular during economically stable times, though experts warn that a frenzy for flipping could lead to a housing bubble, with some even blaming the 2007 subprime mortgage crisis on house flippers.

From 2002 to 2006, “areas with high house price growth saw a significant increase in flipped properties—that is, an increase in the velocity with which properties turned over. This increase in the number of transactions as a response to increased house prices means that a larger fraction of households held recently originated mortgages and thus were near or at their maximum leverage level,” say Manuel Adelino, Antoinette Schoar and Felipe Severino in their study Loan Originations and Defaults in the Mortgage Crisis: The Role of the Middle Class.

Despite its popularity, house flipping, which has been spurred by reality shows that show the upside of renovating and reselling homes, has also been shunned by some who learned their lesson the last time around, realizing that profits aren’t as easy to come by as they were during the bubble years.

“We think it’s a little bit different this time because we think more flips are actually value-added improvements that investors are making to the house, rather than speculative flips which is basically someone buying and sitting on a home waiting for the prices to rise,” says Trulia’s Chief Economist Ralph McLaughlin.

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