House Flipping is on the rise in Sacramento
Do you watch the TV shows like Fixer Upper Starring Chip and Joanna Gaines? Or Flip or Flop? What about House Hunters Renovation? These TV shows make it look easy, but they also come across a lot of “unknown” issues that can be costly. I know a local real estate agent that actually is like having our own Property Brothers type transactions here in Folsom, CA.
Flipping is Making a Comeback!
The trend of buying a fixer-upper is making a return to real estate markets. More than 6% of home sales last year were “flips”, according to a new report from Trulia. That’s the highest number in 10 years, before the real estate bubble burst and the financial crisis of 2008. When the economists see flipping reach ten-year highs, they start to get a bit concerned about another bubble and crash.
Although, this time is different more flips are value-added improvements that investors are making to the home, rather than speculative flips. Plus, home prices are steadily rising. The price increases in 2016 were the quickest in about 3 to 4 years which gives flippers a possible layer of protection. Flips of lower priced homes can contribute to the first-time home buyer inventory, alleviating some of that availability while managing affordability.
Flipping High-End Homes
Although, most of the flipping reported is among luxury properties that have aged out of style, but if brought current, can demand higher prices. Many of these properties were foreclosed on during the housing crash as folks were in over their head with properties they couldn’t afford. Bringing these properties up to date to be put back on the market is a higher risk than the median price range home. The luxury market has a higher inventory level, therefore the potential for the home to sit on the market for longer is likely. If you are flipping luxury homes, you have to be prepared for the time it may take to sell.
Flipping Has Risks
Flipping can be a risky business. If you are getting into flipping homes, do your due diligence. Get a thorough home inspection, pest inspection, and perhaps, even a constructional engineer to investigate the property. The big ticket items you may not see nor show up in an inspection, can take all of the profits out of that flip. Foundation issues, electrical problems, mold, plumbing, roof leaks, etc… all could potentially eat up your expected profits. The whole idea of flipping real estate is to make a quick profit. It’s called speculation, but in this environment of low housing inventory, the flippers are contributing to the demand.
Build Long Term Wealth Through Real Estate
Real estate is a good way to build long term wealth. Flipping can bring immediate payoffs but it is a much larger risk for those that don’t know what they are doing. There are local folks here in Sacramento, Folsom and the local area, that can be used as a resource, so if you need a referral for advice, give us a call.