According to Chris Cagan, vice president of John Burns Real Estate Consulting Inc. in Irvine, today's market - one that most experts agree has been artificially inflated to a degree by investors pumping money into a shortage of inventory - is not the best environment for get-rich profits in flipping homes.
"Home price appreciation has been so rampant, particularly in California and Florida, that flippers and get-rich-quick scam artists are flourishing again," Cagan
"Just as in the mania of 2004-06, flippers make money when the party is raging, but inevitably, someone loses when the party is busted."
colleagues at John Burns have taken a very analytical look at the current state of flipping homes and have come to some interesting conclusions.
The average reported net profit for flippers across the nation was 32 percent - that is allowing for the cost of repairs and sales.
allows that successful flips are more likely to be reported than the failures and challenges the premise that you can make a 30 percent profit in a market that he
says is probably rising at the rate of 10 percent a year.
"The perceived gains from flipping are exaggerated . . ." Cagan
also cautioned about the "get rich quick" mentality that pervades the flipping market and the media hype that goes with it.
"Flipping has moved beyond a segment of professionals working with undervalued and distressed properties," Cagan
"Seminars, tours and television shows encourage people to invest with flippers or to flip homes themselves.
As in the boom of the previous decade, many people see easy money to be made."
The fundamentals of the market appear to be on the upswing, but he
cautions that there are elements at play that are creating artificial demand and that could leave unlucky flippers holding a property and some repair bills - with no buyer.
". . . [Do] not assume that recent successes will continue forever, and be cognizant of the fact that artificial demand - flippers flipping to other flippers - is the ultimate artificial demand and can distort (the) market," Cagan