Flipping Edges Out Renting As The Preferred Investment Strategy

Low inventory of new and existing homes, and price appreciation may be behind shift
buy fix sell signIRVINE, CALIF. – January 21, 2015 – Auction.com, LLC, the nation’s leading online real estate marketplace, today announced the findings from its Fourth Quarter 2014 Real Estate Investor Activity Report™, a nationwide survey of real estate investors bidding on properties offered for auction during these respective periods. This research provides insight into real estate investment trends on both a national and regional level. Survey data collected from investors bidding on property online and at live events across the country reveals that flipping is still going strong.

Auction.com’s findings for the fourth quarter reveal a slight propensity toward flipping among investors overall, although investor intent varies considerably by the type of auction (live event versus online auction) and the investor profile. Survey respondents who indicated that they were making a one-time purchase preferred a hold-to-rent strategy, while respondents identifying themselves as full-time “real estate investors” and those indicating that they were working on behalf of another investor favored flipping.

“It’s probably not a coincidence that some of the highest priced markets, such as California and the Northeast, are seeing more flipping activity, since higher priced homes are more difficult to rent out profitably,” said Auction.com Executive Vice President Rick Sharga. “But it’s also very possible that part of the reason we’re seeing an increase in flipping is that in many of these markets there’s simply not enough new or existing home inventory to meet buyer demand. That spells opportunity for real estate investors who can buy, fix and flip a property quickly and efficiently.”

Q4 2014 National Findings: Investor Intent

Investor Profile

Flip

Rent

Undecided

One-time purchase

27.5%

68.9%

3.6%

Real Estate Investor

51.3%

46.1%

2.6%

Working on Behalf of Another Investor

59.4%

38.1%

2.4%

TOTAL

50%

47.3%

2.7%

Investors bidding at live events appear to be more likely to flip the properties they purchase based on survey responses collected in the fourth quarter of 2014, with respondents indicating a preference toward flipping over holding to rent in every state where Auction.com conducted live events. Of the states represented in the survey, the widest margins occurred in the West and Midwest.

Q4 2014 Live Event Investor Data: Intent of All Investors Surveyed 

State

Flip

Rent

Undecided

Arizona

65.2%

21.2%

13.6%

California

70.3%

27.2%

2.5%

Georgia

48.8%

46.8%

4.4%

Idaho

63.2%

34.2%

2.6%

Missouri

66.7%

33.3%

0%

North Carolina

55.6%

44.4%

0%

Nevada

71%

29%

0%

Tennessee

53.8%

45%

1.3%

Texas

50.7%

48%

1.3%

Washington

72.1%

25.6%

2.3%

Nationwide

56%

41.1%

2.8%

Conversely, responses given at online auctions in the fourth quarter of 2014 show that investors bidding online generally intend to hold the properties they purchase. This was true in three of four regions, with the exception being the Northeast.

Q4 2014 Online Investor Data: Intent of All Investors Surveyed

Region

Flip

Rent

Undecided

West

45.5%

52.2%

2.2%

Midwest

44.9%

53.5%

1.7%

South

39.8%

58.2%

2%

Northeast

50%

46.5%

3.5%

Nationwide

42.3%

55.1%

2.5%

Less active investors (those indicating that they purchase one or fewer properties per year) demonstrated a preference for renting properties, while flipping was prevalent among investors who purchase multiple properties per year.

Q4 2014 Investor Data: Intent By Purchase Profile

Purchase Profile

Flip

Rent

Undecided

0-1 Property/Year

36.3%

61.1%

2.6%

2-49 Properties/Year

54.9%

42.7%

2.4%

50+ Properties/Year

56.3%

39.6%

4%

 

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  This article was published on February 19, 2015. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author and may have been obtained by third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

 

Jeff Sorg

About the Author

Jeff Sorg is a co-founder of OnlineEd®, a Web-based vocational school founded in 1997 where he also serves as Corporate Secretary, Chief Operating Officer, and School Director. Sorg holds vocational instructor licenses in Oregon, Washington, California, and Nevada and has authored numerous pre-licensing and continuing education courses. Sorg was awarded the International Distance Education Certification Center's CDEi Designation for distance education in 2008. OnlineEd® provides real estate, mortgage broker, insurance, and contractor pre-license, post-license, continuing education, career enhancement, and professional development and designation courses over the Internet.