During the first quarter of this year, there were 600 home “flips” in St Louis or about 8.6% of the homes sold in St Louis, according to data just released by ATTOM Data Research. This rate of flipped homes is up 5% from the prior quarter, however, is down 7% from a year ago. The decline certainly doesn’t have anything to do with a lack of interest by investors in flipping, it has more to do with a low inventory and declining mortgage delinquency and foreclosure rates reducing the opportunities.
What is a “flipped” home?
In the report issued by ATTOM Data Research, any home or condo that was sold during the first quarter of this year in an arms-length sale that had previously had an arms-length sale within the prior 12 months as well, was considered a “flip”. Since homeowners don’t tend to buy a home only to turn around and resell it within a year, when this does occur it is typically the result of an investor buying a property, renovating it, then reselling it.
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St Louis house flipping is down over 50% from its peak…
As the table below shows, flipping in St Louis hit its peak during the 3rd quarter of 2005 when 1,242 homes were flipped.
Gross profit from flipping is up…
The difference between what the average flipped home was purchased for and what it was resold for (gross profit) increased from $49,900 a year ago to $66,085 during the first quarter. Now keep in mind, this is not what the investor actually made on the flip, it’s just the gross margin. Out of that comes the closing costs and other costs associated with buying the home, the renovation and repair costs, carrying cost (interest, insurance, taxes, utilities) as well as the closing costs, sale commission, etc from the resale. After deducting the total cost of all of those items from the gross margin, then you have the actual net profit.
St Louis House Flips – 1st Quarter 2018
