What is Household Flipping?

Have you heard of house flipping? Do you know how it is done? In this article we tell you everything you need to know, from what this business is about to the recent trend in the Miami real estate market!

Flipping is a term that is used mainly in the United States to describe the purchase of a good that generates a profit by selling it quickly, it can be applied to any good of value, but it is mostly used in Real Estate.

The term “House Flipping” is used by real estate investors to describe the process of buying a house, where it is reconditioned and then sold at a profit margin.

The profits generated by flipping in real estate generally come from buying at a low price and selling at a higher price, (in a rapidly rising market), or in another of the more common cases, from repairs and improvements made to a dilapidated house and then sold at a profit margin.

In this scenario, whoever buys the house (investor or individual), buys it at a lower price, generally for the following reasons:

  • Condition of the property (eg, the house needs major renovations that the owner is unable or unwilling to afford).
  • The owner needs to sell the property quickly in an urgent case such as change of location, divorce or foreclosure).

Whoever acquires the house, necessarily carries out remodeling in the pursuit of obtaining a profit from the quick resale of the property. The scenario is attractive for real estate investors, since the average homeowner does not have the necessary funds to repair or renovate, and they prefer to look for another home that is ready to move in. Financing agents require that the house be habitable and does not need significant repairs.

House flipping in Miami has been at lower levels in the last 4 years, as the availability of discount homes has decreased.

Rising home prices have put pressure on house flipping individuals who expect to make a significant profit from the sale. If the house is very dilapidated, take into account that it will require a lot of money in repairs and this reduces the profit.

If investment costs rise and the supply of discount homes falls, this could deteriorate the flipping industry a bit, so those in the business need to be very vigilant about market trends.

When the inventory of available homes is low causes prices to rise, margins are low which means that you have to be more careful when buying.

In the last 5 years, home prices have been rising nationwide throughout the United States, currently registering an average price of  $ 238,000.

Although this business is booming, last year flipping figures fell 4% nationally and 3% in the Miami area, due to the increase in prices and the decrease in the inventory of properties available for sale.

For this reason, lower priced houses are selling fast. The outlook also indicates that the number of houses in short sale and foreclosure has decreased as with the increase in prices even homeowners in financial distress are selling their houses quickly before entering a foreclosure. Miami’s sale price to flip has risen from $ 57,000  in 2011 to  $ 157,500 in 2019.

When a foreclosure appears on the market, you have to move fast because there are many people after that property. Last year flipping houses sold up to $ 52,000 more than they were bought.

We have also seen how the house flipping business has evolved from just painting or touch-ups to more in-depth work, including installing new kitchen countertops, installing a new floor, ceilings, or expanding rooms. The goal is that even when the house looks old on the outside it has fully renovated spaces inside, this is attracting the majority of potential buyers.

Buyers usually want to buy in a price range between $ 100,000 and $ 250,000 but do not have the money for repairs or repairs, and this is where investors who dedicate themselves to house flipping take advantage.

Currently house flipping is in vogue and it is becoming more and more competitive as more people seek to enter this type of market.

The advice is to analyze the numbers well, including all the costs that may arise, before entering the market and if the business margin is very narrow it can make the difference between having a good profit or not generating anything.

Important Facts about Flipping in Miami

Percentage of homes sold 8%, Total sales 1,723, Purchased for cash 78%, Average purchase price $ 150,000, Average price of Flip $ 207,000,

We hope that this article has been very helpful in your next business and if you are in the market looking to buy or sell do not hesitate to contact our experienced Real Estate team to give you all the options in the area.