The fix-and-flip market is as hot as ever. In the first quarter of 2020, home flipping reached its highest level since 2006, with flips representing 7.5% of all new home sales during that period.
Experts expect flipping activity to remain strong this year, even as economic uncertainty continues. Low mortgage rates compel investors to look for deals and properties with high potential. But the pandemic is changing flipping trends in a few other ways as well. Here are three big shifts we see.
1. Tastes Are Changing
COVID-19 has expanded the types of flips investors seek. According to Atlanta Broker, Christian Ross of Engels & Volkers, "People are reassessing what home means and its function." He is seeing more investors who are flipping higher-end luxury homes to meet that need.
As more people work from home and choose geographies based on lifestyle rather than proximity to jobs, smart investors are meeting that demand by incorporating the features that today's and tomorrow's homeowner seeks. Flips run the gamut from entry-level price points to luxury ones, according to Ross
2. Hot Markets for Flips Have Expanded
Ross notes that Hoboken, Dallas, Atlanta, Baltimore, Colorado Springs and Tampa are among the most popular locations for flips these days. Ashley Baskin, an agent who is on the advisory board of Home Life Digest, has also seen an increase in activity in areas near college campuses and universities. Because many schools are moving to remote learning, home prices are dropping in those locations, creating deals for flippers.
Cody Dover manages Deal Acquisitions for Little Rock Property Buyers in Arkansas. He is seeing flippers coming to his market from a broader range of locations — Tennessee, California and even Israel. His company has expanded its digital marketing and is drawing from a broader base than ever, appealing to investors who are taking advantage of low-cost, high-potential regions.
3. Caution Is in Order
The basic principles of flipping still hold true. But COVID-19 will have an impact on the process. New and experienced flippers still need to have a solid strategy before taking on a project. They must thoroughly research rehab costs and market trends in specific areas before committing to a flip.
New York Broker James McGrath advises flippers to also take a very close look at local COVID trends in particular communities. "Holding periods are a big factor in flipping returns," he notes. "The last thing you want after closing on a property is having to deal with tight restrictions on showing your home or dealing with a general hesitancy among buyers to see properties."
The Boston Herald recently called house flipping a "pandemic-proof career." But because inventory is low in some markets, flippers still need to exercise caution when bidding on properties to avoid overpaying. Construction workers abound, and in a tight economy, investors may have an easy time finding qualified tradespeople to work on their properties.
Whether you're a new flipper or a seasoned investor, staying on top of market trends and knowing the regions in which you're investing are always important. Use all the comprehensive data available to you, be thorough in estimating your rehab costs, price your property competitively, and learn from experienced flippers about how to avoid pitfalls.
Above all, in times of uncertainty, be prepared to take a long-term view of buyer behaviors. Patience is a virtue in home flipping — now, more than ever.