In a nationwide survey of real estate investors bidding on single-family residential properties offered for auction during the third quarter of 2015, online real estate marketplace Auction.com found that flipping is still the preferred strategy over hold-to-rent.
Largely due to a combination of increasing home prices and a lack of suitable inventory, flipping edged out renting as the preferred strategy in Q3 2015 for the fourth consecutive quarter, since Auction.com began tracking investor intent data. Overall in Q3, 53.7 percent of investors said they preferred flipping, while 45.1 percent said they intended to rent the properties the purchased. About 1.2 percent were undecided.
Although overall more investors preferred flipping in Q3, the data showed that investor intent varied widely by the type of auction (live or online) and by investor profile. Investors who bought properties at live auctions were far more likely to flip, while most investors who purchased homes online said they intended to rent. Out of the four regions surveyed (West, Midwest, South, and Northeast), the Northeast was the only one in which investors who bought online preferred flipping over renting (52.7 percent compared to 45.5 percent).
“Rising prices and extremely limited inventory make a nearly ideal environment for real estate investors who want to buy, fix, and flip properties, and that is precisely where we are in today’s market,” said Auction.com EVP Rick Sharga. “But record occupancy rates in the rental market also present opportunities for investors who find moderately priced homes they can rent out at a reasonable rate of return, so it’s not surprising that we’re continuing to see buy-and-hold investing activity in the Midwest and Southeastern states.”
Overall, 54 percent of investors who purchased online in Q3 preferred a hold-and-rent strategy compared to 43.3 percent who said they intended to fix and flip. Conversely, 62.4 percent of investors who purchased at live auctions said they intended to flip, compared to 37.6 percent who said they preferred renting the properties they bought.
Most investors who bought only one property per year preferred renting over flipping (60.1 percent compared to 37.3 percent). Investors who purchased between two and 49 properties per year mostly preferred flipping, however (58.8 percent), as did investors who purchased more than 50 properties per year (66.7 percent).