by Miranda G. McLeod
Staff Writer
Flipping property is nothing new, but the amount of money being made these days by real estate investors may be a bit shocking.
Flipping is the process of buying and quickly selling property, usually within a year and without establishing residency.
As of July 31, there have been 741 properties flipped within the calendar year grossing investors more than $49 million. That’s an average profit of more than $66,000 for properties in Northeast Florida, according to Ray Rodriguez of the Real Estate Strategy Center of North Florida.
The Ponte Vedra area ranked first in profits with an average of $342,000 made in house flipping. The Paxon area, or Westside, ranks first with the most properties bought and sold.
Flipping condominiums has also proven to be lucrative with average profits of $115,000 per resale.
But, Rodriguez points out, flipping is being slowly phased out as investors are shifting from the for-sale market to the for-rent market. When condo conversions peaked, rental inventory was removed from the market. Now that the demand for condos has cooled, conversions are slowing and in some instances, condos revert back to rentals.
“The days when people bought brand new townhomes and flipped them are over,” he said, adding that the market may be in for a resurgence in the inventory of rental property. “That’s what happens when the market is full.”
Chris Morgan, president of brokerage firm Cantrell & Morgan, said the for-sale condo market has been correcting itself because of less absorption rate based on interest rates. The trend over the past few years, according to Morgan, has been for developers to build massive condominium projects and sell the units on speculation. Current condo towers coming out of the ground are examples of this type of construction.
“Those projects could not have gotten built without presales,” said Morgan.
Morgan said there’s now an opportunity for developers to revert to building for-rent apartment buildings as opposed to for-sale condos.
“There is a window of opportunity for a number of national, multi-family, for-rent owner-developers to take advantage of the correction in the for-sale multi-family positions,” said Morgan. “For the last 2-3 years, the multi-family for-rent buyer or developer has been shut out of the land purchasing in Northeast Florida because of the escalation in price driven by the demand from the for-sale developer.”
Some investors have had restrictions implemented by builders in the contracts, such as restricting the sale of property for a year after purchase. Rodriguez says flipping had become a fad, but consumers are now exiting the market and it’s the investor who will benefit because there’s less competition. There’s less inventory because of the slew of apartments converted to condos. That low supply of rental property is leading to an opportunity for investors.
The challenge now for developers, according to Rodriguez, is to find available, zoned land for apartment development.