Investors pile into house-flipping

Earnings on home sales rise but so do prices

(iStock/Illustration by Kevin Rebong for The Real Deal)
(iStock/Illustration by Kevin Rebong for The Real Deal)

The number of investors backing house-flippers jumped 50 percent in two months, as low interest rates continue to drive the hunt for higher profits.

Research firm Attom Data Solutions found that the gross earnings on a fix-and-flip home reached a little more than $66,000 in 2020, the highest since 2005, Bloomberg reported. But prices have increased for such homes, slightly reducing the profit to 40.5 percent last year compared with 41.5 percent in 2019.

House-flipping mortgages, meanwhile, carry an average annual rate of 7.9 percent, more than twice the 3.09 percent rate for a 30-year mortgage. Talk show host Ellen DeGeneres has become one of the most prolific luxury home-flippers in Los Angeles. Less than two years ago, DeGeneres paid $42.5 million for Maroon 5 frontman Adam Levine’s Beverly Hills mansion, and recently listed it for $53.5 million.

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Financial firms backing the flippers are not, however, the most-recognizable names on Wall Street. Many of those firms invested heavily in single-family rentals after the foreclosure crisis, but the firms investing in house-flipping today are primarily regional banks and alternative lenders.

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[Bloomberg] — Georgia Kromrei