30 Sep Luxury Home Flipping on the Rise
Typically, when you think about home flipping, dilapidated bank-owned properties are probably the first things that come to mind. As the housing market fell spectacularly to pieces in 2008, investors were on a mission to find foreclosures that they could renovate and sell for a profit. But these days, the inventory of foreclosed and bank-owned homes is lower than ever before. As such, luxury home flipping is on the rise.
Investors have turned their attention away from run-down properties and are setting their eyes on the luxury market. According to Daren Blomquist, vice president of RealtyTrac, million-dollar homes are an untapped market.
“Investors have actually run out of inventory on the low end of flips, and now they’re moving to the higher end,” Blomquist said.
RealtyTrac reports that in 2012, flips of homes priced at $1 million and higher jumped 35 percent year-over-year. Eric Sussman, senior lecturer at the Ziman Center for Real Estate at the University of California, Los Angeles, said: “These aren’t paint-and-lipstick jobs. Basically, you have to re-envision the entire house.”
Generally speaking, the purchase, renovation and sale should all be complete within six months in order to maximize profits.
Real estate agents around the U.S. say they are fielding about 30 percent more inquiries from luxury flippers than one year ago. And despite the risk involved in flipping a luxury home, like a longer timeline to sell and pricier renovations, investors are showing a continued interest in this market.
What’s even more interesting is that in many markets that were hit the worst during the recession, luxury flips are gaining ground. Investors have depleted the supply of lower-end homes to flip in these markets, so the luxury segment is the next best thing. Of course, they cost more, but there are still tremendous deals to be had for luxury properties around the U.S. And when you consider that these homes generally have the highest home-appreciation rate, it’s easy to see why they have come squarely into the spotlight.