House flipping increased 6.5% in the first quarter compared the fourth quarter of 2014, according to Auction.com's Real Estate Investor Activity Report. The report finds that investors continue to prefer to flip properties as opposed to renting them.
Rick Sharga, executive vice president for Auction.com, says that part of the reason investors prefer flipping right now is because inventory is tight, which, in turn, is driving up prices, which, in turn, makes it tough to rent homes at reasonable rates.
‘It seems clear that the unusually low inventory of homes for sale has led to higher home prices, which makes it challenging for investors to rent homes out at a rate that's profitable and still affordable for tenants,’ Sharga says. ‘So, in states like California, Washington, Nevada and Arizona, a large number of investors have decided that the best opportunity today is to meet the demand of prospective homeowners by buying, fixing and re-selling investment properties.’
The report reveals that the fix and flip strategy was more prevalent among institutional investors in the first quarter – whereas individual investors were more inclined to use a hold-to-rent strategy.
What's more, those bidding at live events were more likely to flip whereas those who bid at online auctions were more likely to hold and rent, according to the report.