Flipping houses stays red hot and tampa bay remains one of its favorite markets la gas prices now

Not since the bubble days of 2005-2006 has home flipping been as popular as it is today. Nationally, flipping hit a 10-year high in 2016, according to a new report from the parent company of RealtyTrac. Among the 117 major metro areas with at least 250 flips, Tampa Bay had the fourth-highest flipping rate. Nearly 10 percent of all bay area homes sold last year were flips.

Flipping first hit frenzied levels in the early 2000s as investors snapped up properties for resale while prices continued their seemingly unstoppable climb. When the market crashed, many of those investors were stuck with houses — often bought with high-interest loans — that they couldn’t unload.

As foreclosures surged and banks stopped lending, cash buyers swooped into the market. Nationally, about 85 percent of flips were bought with cash in 2010 compared to only about 30 percent in 2005. Those cash flips helped revitalize neighborhoods blighted by abandoned houses, but also fueled an increase in home prices that once again is prompting some flippers to seek financing.

The company’s most popular loan locally is the "FixNFlip," which finances 90 percent of the purchase price and 90 percent of the cost of renovations and/or new construction. Borrowers, who pay a loan origination fee and interest rates ranging from 7.99 percent to 12 percent, fall into two main categories.

"The first is a very seasoned, full-time real estate investor … and that person has a credit score of 700 or above and has done five-plus flips in 2016," Warren said. "The other half of our business are investors who have not done five flips, but have full-time jobs, a steady income and they get into flipping for additional income."

As the economy recovered, foreclosures began to dry up and their prices rose. Last year, sales of foreclosures in the Tampa Bay area plunged almost 48 percent while prices soared 19 percent. Now, flippers are paying about the same market-value prices for foreclosures as they are for other homes.

"That means the actual profit for the investor is coming through heavier reconstruction," Warren said. "They’re paying more for the properties and putting more into them, and that is one of the reasons you’re seeing a pretty dramatic rise (in prices) in certain neighborhoods. But it’s not that the homes inherently are rising, it’s the value created by the construction. People get fearful that, ‘Oh, prices in this neighborhood have gone up 25 percent,’ but it’s really not the same house. It’s comparing apples and oranges."

In the past three years, Lima One has loaned to several dozen limited liability companies in the Tampa Bay area, public records show. None of the loans has defaulted and several have been paid off. The typical life of a loan is about 270 days, Warren said.

Paloscio did better with the next flip financed by Lima One: a four-bedroom house in Tarpon Springs that sold for $155,000 more than he paid. "There were no structural issues and we didn’t have to do any major updates, just more cosmetic things like paint and carpeting," he said.

Smith has been surprised at how much home prices have jumped in parts of Hillsborough and Pinellas counties in just the past six moths. As a result, he is now turning his sights to places like New Port Richey and St. Petersburg’s Midtown district that he never considered before.