Number of investors flipping homes returns to precrisis levels; big banks also get back in the game
House-flipper and real-estate agent David Franco stands in front of a Los Angeles-area house he flipped at a profit. Photo: David Franco
This is a great time to be in the house-flipping business.
The number of investors who flipped a house in the first nine months of 2016 reached the highest level since 2007. About one-third of the deals were financed with debt, a percentage not seen in eight years.
Now Wall Street, which was nearly felled by real-estate forays almost a decade ago, is getting back into the action. A number of banks are arranging financing vehicles for house-flippers, who buy and sell homes in a matter of months. The sector is small—participants say roughly several hundred million dollars in deals have been made in recent months—but it is expected to keep growing.
“The floodgates have opened,” says Eduardo Axtle, a 35-year-old former telecom entrepreneur in Oakland, Calif., who has taken out about 50 home loans over the past five years. These days, he is bombarded with unsolicited emails from brokers offering him access to financing, and fellow flippers invite him to get-togethers that are advertised with YouTube videos showing off recent projects.
Investors are making an average profit of about $61,000 on each flip, up from about $19,000 at the bottom of the market in 2009. The calculation measures the difference between the housing value when an investor purchases the home and when it is sold, according to housing-research firm ATTOM Data Solutions, which is also the parent company of real-estate website RealtyTrac.