Home flipping flagged in 2014
As discussed in our recent earnings call, the state of the residential real estate market continues to evolve for real estate investors working with single family and 2 to 4 unit properties. The following article validates some of the information in our presentation regarding more capital chasing fewer transactions. Albeit the article states profitability of real estate flipping is statistically higher, our experience is that there is margin compression year-over-year in similar transactions (e.g. light rehab) forcing real estate investors to take on projects involving greater rehab, including adding square footage, to generate higher returns. Therefore, our conclusions remain the same. Specifically, that the risk profile of this segment of the market may be increasing as certain lenders increase their loan-to-values to advance more against projects requiring greater amounts of work.