Via DSNews,

From the beginning of the housing market recovery in 2009, REO rehabilitation and flipping or renting has provided to be a strong source of profitability among career property investors and beginners in the industry alike. Despite recent data showing a decrease in foreclosed properties, RealtyTrac still showed that 6.6 percent (43,740) of all single family home and condo sales in the first quarter of 2016 were flips. This was a 20 percent increase from the previous quarter as well as a 3 percent increase from a year ago. It was also the highest rate of home flips since the first quarter of 2014. 

“After faltering in late 2014, home flipping has been gaining steam for the last year and a half thanks to falling interest rates and a dearth of housing inventory for flippers to compete against,” said Daren Blomquist, senior vice president at RealtyTrac.

D’Arcy Young, President of Residential Recovery Partners, an operating platform organized to identify and manage high yield, asset secured investment opportunities in the single family residential market, holds a slightly different view of the house flipping than that of RealtyTrac.

Young says that as a professional in the industry, he sees the home flipping trends beginning to cool off in a way meaning there seem to be fewer opportunities that he believes make true financial sense.

“There were a lot of professionals who saw the opportunity starting in 2009 to buy properties and from there they started fixing and flipping them and rode the appreciation market up,” says Young. “Now what we’re seeing is there is a lesser grade of investors entering the market with hopes and dreams of making good money in the fix and flip market and in general over paying for properties and putting pressure in terms of price on opportunities. So for people like myself, the opportunities seem to be fewer and fewer to come by.”

Young’s opinion aligns with that of RealtyTrac’s, though, in terms of properties putting pressure on home prices. Blomquist says, “While responsible home flipping is helpful for a housing market, excessive and irresponsible flipping activity can contribute to a home price pressure cooker that overheats a housing market, and we are starting to see evidence of that pressure cooker environment in a handful of markets.”

For markets such as Vallejo, California, rehabilitated foreclosed properties were snatched up in 2009-2010 from the bankrupt city. But according to a report from Realtor.com, those days in Vallejo are long gone. Realtors and investors in the area are reporting multiple offers and bids well over asking price.

Young says that the trends seen now are those of distressed inventory being relatively low putting pressure on the amount of properties available.

“The higher quality assets have been the ones that banks have foreclosed upon so those cleared relatively early. Now you are left with the lesser product that is coming to market or becoming available, and that is just not optimal in terms of making a fair return on your money in doing a fix and flip,” says Young.

Despite the decrease in optimal inventory, the rehabilitated properties that are being used as rental properties has continued to prove to be a profitable investment for seasoned investors and beginners alike. Young shares that this sector allows investors time to gain greater appreciation on the properties as the market moves as well gives them more flexibility than the “buying, fixing, flipping” sector.

For those in the single family rental market, staying on top of the latest trends as well as growing and maintaining relationships in the industry are key elements to remaining successful in this market sector. The Five Star Institute hosts the annual Single-Family Rental Summit as a way to offer training, tools, and strategic partnerships that will foster business opportunity, elevate professionalism, and establish best practices across the expansive SFR industry.

Original article can be read here at DSNews,