House flipping rare, but payoff often generous

Few in Albuquerque, Cruces, but practice could increase as home prices rise

Flipping houses appears to be a rare but lucrative investment practice in the Albuquerque and Las Cruces metro housing markets, according to a new report.

Albuquerque had just 12 f lips in 2012 with an average gross profit of 40 percent, Irvine, Calif.-based RealtyTrac reported this week.

Measured against data from the Greater Albuquerque Association of Realtors, the 12 flips were almost insignificant compared to the 7,672 sales of homes last year while the 40 percent gross profit looks particularly strong compared to last year’s average price increase of less than 2 percent.

Las Cruces saw just seven flips in 2012, but the average gross profit was 86 percent. As in Albuquerque, the seven flips were insignificant against 1,256 sales. The 86 percent gross profit, however, looks great.

In RealtyTraq’s report, a house flip is simply a home resold within six months of the previous sale. There’s a caveat to the profitability of the flips.

Albuquerque’s gross profit of 40 percent is based on an average purchase price of $104,288 and average selling price of $145,750. What the investor or flipper put into the house to increase its value by an average of 40 percent within six months is a big variable.

The average purchase and sales prices also point to flipping taking place at the low end. At $145,750, the average sales price of a flipped house was 29 percent lower than Albuquerque’s average price of $204,513 for 2012.

Las Cruces’ gross profit of 86 percent is based on an average purchase price of $75,596 and average sales price of $140,786. The average sales price for a flip is close to the middle of the Las Cruces metro’s housing market, where the median sales price was $145,975 in 2012.

Flipping, which is typically a sign of a housing market with rising home values, is on the rise in markets hit hard by the bursting of the housing bubble. Phoenix, for example, had more than 10,500 flips with an average gross profit of 44 percent last year, RealtyTrac reported.

The trend of increased house flipping is expected to continue.

“Flipping homes — buying, rehabbing and reselling for a profit usually within about 90 days — will likely become more favorable for investors in 2013 as home prices are expected to continue climbing,” RealtyTrac says on its website.