IRVINE, CA—Markets with certain supply-and-demand traits are more ideal for flipping homes than those without these traits, RealtyTrac's VP Daren Blomquist tells GlobeSt.com. As we recently reported, according to RealtyTrac's latest buy-to-rent analysis and buy-or-rent analysis on three-bedroom residential properties in 285 counties nationwide, potential returns from buy-to-rent purchases of these properties in the first five months of 2015 decreased from the same time period a year ago in 59% of the 285 counties analyzed. We spoke exclusively with Blomquist about what factors lead to rent vs. purchase affordability in various markets and what circumstances cause flipping to be more profitable than a buy-to-rent strategy.

GlobeSt.com: What drives a market to be more affordable to rent than buy, and vice versa?

Blomquist: It really comes down to supply and demand on both sides of the equation. In more densely populated areas, we tend to see renting is more affordable because space is at such a premium that it pushes prices out of reach of the median income earner. Rents can still be high in those areas, but they are more affordable than buying and don't require a down payment, which, when we're talking about markets like San Francisco County, where the average price of a three-bedroom home is $1.5 million, is a very substantial amount of money. On the other side, markets with more space and available supply of single-family homes and condos will not have so much upward pressure on home prices. Another demand factor here is outside investors from other states or other countries. In markets that attract those types of buyers, we tend to see upward pressure on prices—and from buyers who are typically not as constrained by income and affordability concerns.

GlobeSt.com: Do you believe flipping will become the more-dominant investment strategy in markets where buy-to-rent returns are decreasing?

Blomquist: Yes, absolutely. With space at a premium, flippers can come in and tear down existing properties and construct new ones that more efficiently use that space. For example, they might take a lot with a single-story home on it, subdivide it into three lots and build three three-story properties on that same lot. This type of infill construction is becoming a more-popular form of flipping in densely populated markets like Los Angeles and Seattle.

GlobeSt.com: Is new-home construction increasing in markets where buying is more affordable than renting?

Blomquist: Builders are still being very cautious, in part because the price of land is still pretty expensive and their most profitable products are the higher-end properties that might not be as affordable as the existing homes in those markets. This continues to leave a lot of room for the buy-to-rent investors to come into these markets.

GlobeSt.com: What else should our readers take away from your buy-to-rent and buy-or-rent analyses?

Blomquist: It's still a great time to buy homes as rentals in certain markets, with the prospect of good rental returns in the short term and the option of cashing out in the long term if traditional buyers start coming back to the market. For folks who are renters in the more-affordable renter markets, it may be best to just stay put, since there is a good possibility at some point in the next few years that there will be an opportunity to buy affordably. For folks who are rents in the more-affordable buyer markets, it may be time to at least consider starting to build wealth through homeownership.