As marketing, advertising and public relations professionals for many builders and developers over the years, Spiro & Associates is always keen to real estate market news in Southwest Florida.
Today we discovered the Cape Coral / Fort Myers market is among the top 10 in the nation for flipped homes. Investors and others looking to make a return on an investment buy homes, rehab them, and put them back on the market all within a 12-month period.
In fact, of the top 10 metro areas in a recent report, six are in the Sunshine State.
According to RealtyTrac’s latest data from the second quarter of 2015, the Cape-Fort Myers region saw 293 single-family homes flipped. Only six other metropolitan statistical areas in the report had higher flipped sales.
Flipped Sales Look Like it’s 2006 Again
The Cape/Fort Myers’ sales equate to only 7.8 percent of total sales in the second quarter, so this marketing strategy is not significant. Also, compare this number to the second quarter in 2014 and we see a decline of 16.5 percent quarter over quarter.
- But 7.8 percent does harken back to the early days of the economic downtown in 2006, when flips nationwide were 8 percent of total sales.
- It is also a lot more than the national average of 4.5 percent of total sales.
- And it is taking all of six months for the flippers to make the sale.
Taking a look to the north of us, the Sarasota-Manatee region saw 8.1 percent of all single-family home sales were flips, and Charlotte County’s 81 flips equated to 6.9 percent of all single-family sales, according to the Sarasota Herald Tribune.
Profits to Be Had
Somebody’s making money, folks.
The national gross profit numbers show that some flippers making significant returns on their investments.
The average gross profit — the difference between the purchase price and the flipped price, which excludes costs to rehab and other expenses — for completed flips in the second quarter was $70,696.
When you figure that most flippers are looking at probably spending 20 percent to 30 percent of the after-repair value of the home, there’s still some validity for those who know what hey are doing.
Looking back, we found that the national average gross profit from the first quarter of this year was $67,753 and a year ago it was $49,842. So what gives? We know that low-end homes, say, under $55,000, can actually have negative returns for flippers, so maybe it is higher-end homes that are being rehabbed and flipped to make such an ROI.
Turning to Punta Gorda as another example, that area’s average purchase price for what would become a flipped home was $108,243. The average price it sold after repairs? — $163,906 – again that’s after rehab costs. Still, that’s a $55,000-plus advantage.
Some real estate professional are cautioning flippers to be extremely careful over the next six months, as home prices may stabilize and mortgage interest rates could increase, both of which could put on damper on flipping houses in Florida.
RealtyTrac’s 2015/2ndQ Report