KKR loves the upside in crowded house-flipping space

The investment firm, known for company takeovers, has invested a total of $500M in Toorak Capital Partners

KKR Co-CEO Henry Kravis (Credit: Getty Images and iStock)
KKR Co-CEO Henry Kravis (Credit: Getty Images and iStock)

KKR, the investment firm known for company takeovers, has doubled its stake in a company that targets house-flipping.

The firm invested another $250 million in Summit, New Jersey-based Toorak Capital Partners, which has $1.5 billion in house-flipping loans on its books, according to the Wall Street Journal.

Toorak buys loans from firms like LendingHome and PeerStreet, which issue 12-month, high-yield mortgages for home fix-and-flip projects that fetch interest rates between 8 to 12 percent.

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In May last year, KKR upped its investment in the house-flipping firm from $75 million to $250 million. It now has invested a total of $500 million.

According to a recent study by CoreLogic, 10.6 percent of U.S. home sales in the fourth quarter of 2018 were flips, close to the 2006 house flip rate of 11.3 percent. The market these days is quite different that the one that preceded the recession: flippers in the fourth quarter on average made a nearly 23 percent profit on flips, compared to 6 percent in 2006. Institutional investors comprise more than 40 percent of flippers today, with companies like Opendoor, Zillow and Redfin all placing big bets on the space.

The most popular markets for house flipping today include Birmingham, Alabama and Memphis, Tennessee. [WSJ] — David Jeans