Housing market: Home flipping falls in first quarter

Home flipping declined across South Florida in the first quarter, but the region was still among the nation’s most active for home flippers, a new report shows.

There were 882 flips in Palm Beach, Broward and Miami-Dade counties from January through March, down from 1,295 during the same period a year ago, according to the RealtyTrac listing firm.

The first-quarter flips accounted for 7.9 percent of all single-family home sales, compared with 10.5 percent a year earlier RealtyTrac said. Even so, only the Memphis (10.6 percent) and Ocala (8 percent) metro areas had higher shares of flipped homes to start the year.

Flipping – buying and reselling within 12 months – was a lucrative business for investors in 2012 and 2013 because home prices had hit bottom and there was a large supply of foreclosed homes selling for discounts.

But many of those distressed properties have been sold, and prices have risen to a point that makes flipping impractical for some investors, said Daren Blomquist, a vice president of RealtyTrac, an Irvine, Calif.-based foreclosure listing firm.

“The perfect storm for flipping has passed in a lot of markets,” he said Wednesday.

But Blomquist expects flipping to remain a prominent part of the South Florida landscape, given the strong demand for homes here and pockets of affordability that will attract investors.

South Florida’s average gross return on investment for first-quarter flips was 39.6 percent, down from 40.9 percent a year ago, RealtyTrac said.

Lex Levinrad, head of the Distressed Real Estate Institute, a club for investors in South Florida, said he tells members interested in flipping that they should gross at least $30,000 or a 30 percent return.

While deals are harder to find, flippers who do buy right can benefit from higher prices when it comes time to sell, Levinrad said.

“It’s much more challenging, but if you find a good property, momentum is on your side,” he said.

David Dweck, a private lender and founder of the Boca Real Estate Investment Club, said he turned down two loan requests recently because he was concerned the investors were not making sound purchases. His long-standing advice to flippers: Don’t spend more than 65 percent of the market value after repairs.

“People are starting to pay too much,” he said. “The smart investor will not overpay.”

While many flippers are selling to first-time buyers, investors planning to hold and rent are scooping up properties. In the first quarter, 39 percent of the flipped homes were sold to buyers who didn’t plan to live there, RealtyTrac said.

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