Distressed Renovation Returns Insulated from Market Shifts ALL HOME FLIPS PURCHASE DISCOUNT ALL HOME FLIPS GROSS FLIP RETURN RENOVATED DISTRESS HOME FLIPS PURCHASE DISCOUNT RENOVATED DISTRESS HOME FLIPS GROSS FLIP RETURN
70.0%
60.0%
50.0%
41.9%
40.0%
30.0%
20.0%
20.6%
10.0%
0.0%
-10.0%
-9.8%
- 20.0%
-21%
-30.0%
-40.0%
SOURCE: ATTOM DATA SOLUTIONS
second quarter of 2023, according to an analysis of public record data from ATTOM Data Solutions. This institutional investor category includes iBuyers such as Opendoor and Offerpad and single- family rental operators such as Yamasa, NVR, Tricon Residential, Amherst, and Progress Residential. The quick and light-renovation flipping strategy employed by iBuyers has proven more difficult in a market where home prices are flat or falling, and many of the single-family rental operators have turned their focus to building
rentals rather than buying and renovating existing homes.
acquisition volumes or rising home prices to fuel their business model or profitability. The resiliency of the distressed property acquisition method is evident in flipping profit numbers from ATTOM. In these numbers, a flip is defined as any property sold a sec - ond time within a 12-month period. Overall, gross home flipping returns, not including renovation and holding costs, dropped to 16% in the fourth quarter of 2022, the lowest they’ve been since the fourth quarter of 2009. Home flipping returns rebounded a bit in
RESILIENT DEMAND But local smaller-volume investors purchasing and renovating distressed properties are often insulated from the headwinds facing institutional investors. These local community developers typically purchase fewer than 10 properties a year, all within a 100-mile radius of their operating base, and add value to those homes through renovation. They don’t need massive
48 | think realty magazine :: september – october 2023
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