Investors Still Saying Yes to Flipping

Editorial|&utm_term=|Website-Editorial-NAT(Website)|"> Auction.com's January 2015 Real Estate Investor Activity Report. Survey data collected from investors bidding on property online and at live events across the country in January reveals the continuation of a trend seen in the fourth quarter of 2014—a preference for flipping over a hold-to-rent strategy, even as the demand for rental housing continues to grow in most markets.

Although Auction.com's findings for January show a slight propensity toward flipping overall, investor intent varies considerably by the type of auction (live event vs. 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.

Also, investors bidding at live events appear to be more likely to flip the properties they purchase based on survey responses collected in January, with respondents indicating a preference toward flipping over holding to rent in all but two of the states where Aucton.com conducted live events. The two states where renting prevailed were Georgia and Missouri.

Conversely, responses given at online auctions in January show that investors bidding online are more likely to hold the properties they purchase. Less-active investors (those indicating that they purchase one or fewer properties per year) demonstrated a clear preference for renting properties, while flipping was prevalent among investors who purchase multiple properties per year.

As GlobeSt.com reported in January, Rick Sharga, EVP of Auction.com, told us exclusively, “I think the difference in investor intent is less about whether the auction is online or a live event and more about the types of properties and the geographic regions involved. We have investors who target specific geographies because they're excellent rental markets—cities in Michigan, Ohio, Illinois and Indianapolis—where we have online properties, but don't do live events. Some of the more prominent markets where we do live events—California, Arizona and Nevada, for example—the conditions are more conducive to flipping: higher-priced homes and low inventory of existing homes for sale.”

Regarding the January report, Sharga says, “Considering recent reports that have suggested a shortage of rental units in some metropolitan areas, we'd expect to see more investors starting to move toward a buy-and-hold strategy to address this market opportunity. We know anecdotally that some flippers purchase homes specifically to sell them to other investors who repurpose the properties as rental units. But, it will be interesting to see if more investors move away from flipping and toward rental strategies over the next few months if demand for rental housing continues to rise.”