A national survey of real estate investors shows that a majority of investors during the second quarter purchased their properties with the intent of later flipping them.
The Secord Quarter 2015 Real Estate Investor Activity Report, released Tuesday by online real estate marketplace Auction.com, marked the third straight quarter in which more investors said they planned to flip the properties they bid on, instead of holding onto them and renting them out.
“Most of the country and most investor segments performed in a manner very consistent with what we’ve been seeing for about a year,” Auction.com Executive Vice President Rick Sharga said in a release.
Overall, 53 percent of survey respondents said they planned to flip their purchased properties. Nearly 46 percent said they intended to rent their purchased properties, with 1.2 percent saying they were undecided.
Matt Atkinson, a branch manager with Flagship Financial Partners and president of the Utah Valley Real Estate Investors Association, said he thinks flipping is trendy right now, and that he prefers the long-term possibilities provided by holding and renting investment properties.
“A lot of newer people are trying to get involved, and learning how to flip properties is definitely a higher skill set, or more intense,” Atkinson said. “I actually think a lot of people should obtain rental properties first, for long-term wealth creation. It’s a lot less work, and I think if people are going to buy at an auction, they have to really do their due diligence up front.”
The decision on whether to flip or rent an investment property largely seems to depend on the type of investor purchasing the property. According to the study, nearly three-quarters of those making a one-time purchase intended to hold onto their property and rent it, with 26.5 percent choosing to flip the property. But for those who classify themselves as full-time real estate investors, 55.6 percent said they were likely to flip an investment property. That number climbed to 63.7 percent among respondents who said they work on the behalf of another real estate investor.
Intent also varied depending on how the investment property was purchased, the report said. Among investors who purchased at live auctions, 61.3 percent said they intended to flip their properties. For those who bought an investment property online, however, 53 percent said their intent was to hold onto the properties and rent them out.
Many national lenders will offer bridge loans or hard money loans to real estate investors, but Atkinson recommended investors look to their neighbors to fund such loans. Atkinson also suggested that lenders and brokers get involved with local real estate investment clubs to learn as much about the process as possible.
“I’ve seen that the best success is having relationships with other local real estate investors who happen to lend money in different geographical areas,” he said. “Maybe they may have a little more favorable terms, or they may have a little insight on why to buy a property at the auction — or maybe to walk away from it, based on their experience.”