Thinking of flipping houses in Big D? You might want to reconsider.
The Dallas real estate market is improving at such a rate, the benefits of flipping houses are starting to wane. In fact, the number of houses purchased last year for a flip for profit decreased significantly from 2015 levels, according to Dan Brown, Real Estate Editor for Dallas News. Also noteworthy, the percentage of Dallas home flips is less than half the nationwide level, according to a recent study by Trulia.
“Just 2.8 percent of home sales in Dallas were house flips in 2016 — a 3.3 percentage point decline from the year before in 2015, when flipping hit a peak,” Trulia researches found.
Across the country, Trulia found that more than 6 percent of home sales in 2016 were flips. To clarify, a home flip is typically defined as a home sale that takes place within a 12 month period of the owners purchasing the property. Usually, the buyers purchase a home that is being listed at a discounted price (usually foreclosures, bank owned property, fixer uppers, etc) and perform upgrades, renovations, and repairs so that they can resell the home at a profit.
Trulia’s research found that home flipping was at its highest level in a decade in 2016.
“In 2016, national flipping activity increased for the first time in three years,” said Trulia’s chief economist Ralph McLaughlin. “Flipped homes made up 6.1 percent of all home sales last year, up from 5.3 percent in 2015.”
Despite this trend, Dallas is one market where the home flipping phenomenon is losing steam.
The Dallas market is struggling with a shortage of homes for sale, adding value to what inventory is available. This naturally causes home prices to increase. Therefore, with fewer homes on the market and gradually rising real estate prices, flippers have less opportunity to profit.
According to Brown, December saw a drastically low 2-month supply of preowned homes on the market in the Dallas-Fort Worth area.
Looking for an alternative to flipping? Consider buying a rental home.
Although North Texas has limited inventory, there are still some excellent opportunities for home buyers to make money through the local real estate market. While flipping may not produce as great a return as it used to, rental properties are still in demand and rental rates continue to climb. Instead of trying to flip a house in North Texas, perhaps investing in a rental home would be a better way to boost your income?
With a rental home, there is the added responsibility of being a landlord; however, having consistent rental income coming in while your home builds equity can pay off well down the road. Think of it as more of a long term investment that’s good for a strong market, while flipping is a tactic better suited to making a quick profit in an area that’s been depressed but is experiencing new growth. Considering the current state of the Dallas-Fort Worth real estate market, flipping is understandably not a widely effective strategy.
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