Estimated Gross Rental Yield: Properties Purchased on Auction.com in 2023 Renovate-and-Rent Returns by Market
6.0%
20.0%
30.0%
40.0%
50.0%
62.4%
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DISTRESSED PROPERTY PURCHASE DISCOUNT (BELOW AFTER-REPAIR VALUE)
-2%
-67%
other investors often overlook them. “Most people are not willing to go to these types of markets.”
homes flipped in the second quarter of 2023 was 27.5%, up from a recent low of 22.3% in fourth quarter 2022 but less than half the 61% peak in second quarter 2021. Local community developers like Garfield who typically purchase distressed properties at a discount are shielded somewhat from slowing home price appreciation. Still, data from Auction.com shows that even these distressed
ressed properties purchased in 2021. The average gross return for distressed properties purchased so far in 2023 has rebounded to 53.9% but is still below the 2021 level. The average gross renovate-and-resell return is the gross profit as a percent - age of the original purchase price. The gross profit is simply the resale price minus the purchase price and does not include any rehab costs, holding costs or sales costs. “We’re doing less high-end flips,” said Garfield. “I’m not sure how many $400,000 houses I want to do, because with rising interest rates there are a lot fewer people who can afford that.”
COMPRESSED RETURNS The sharp slowdown in price appre- ciation and even price correction in many of the larger and more popular markets for investors are compress- ing potential returns nationwide. Potential profits on home flips ticked slightly higher in the second quarter of 2023, but they were still down by more than half from the recent peak in 2021, according to ATTOM Data Solutions. The gross flipping return on investment for
property buyers experienced compressed returns in 2022.
The average gross renovate-and-resell return was 49.4% for distressed pro- perties purchased on Auction.com in 2022, down from 61.7% for dist-
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