SARASOTA, Fla. – From “Flip or Flop” to “Boise Boys,” home flipping shows remain popular on streaming services and network television in 2022.
But in the Sarasota area’s real estate scene, where the median home price has shot up to $500,000 amid a scarcity of homes for sale, real-life flippers have found it exceedingly difficult to stay in the profession.
When they do find a property where the numbers can work, supply chain issues have pushed the cost of building materials higher than ever – eating away at potential profit. That’s not to mention the nightmare it has become to find subcontractors amid the Sarasota building boom.
Clint Kasten moved to Sarasota in 2010 and got into home flipping, saying he bought, renovated and then sold about 60 properties in the Sarasota-Manatee market.
But at the end of 2018, Kasten said he had to throw in the towel after the number of distressed properties on the market dried up, making it difficult to do the work full-time, given that the starting costs for property were so much higher.
“I would say that is even more true today,” Kasten, now a full-time Realtor with Premier Sotheby’s International Realty, said.
Home flipping – or buying outdated properties in need of renovation, investing in those properties and then selling for a profit – has been a valid form of business for decades in Sarasota.
Coming out of the Great Recession, thousands of foreclosed properties clogged the courts, requiring years to clear – and feeding the Sarasota home flipping industry a consistent stream of properties that never hit the traditional resale market. Short sales by homeowners underwater on their mortgages also supplied properties at attractive prices.
Today, that supply has been exhausted and just a handful of distressed property sales are recorded every month, according to recent Realtor Association of Sarasota Manatee data.
While Sarasota flippers say it’s difficult to find properties locally, deals still exist and other areas have recorded record median profits. WalletHub reported last July that Sioux Falls, South Dakota, was the best city in which to flip a house, followed by other locations like Missoula, Montana, and Nampa, Idaho. The only Florida city in the top 10 was Tampa, as price increases in the Sunshine State broadly pushed down activity.
Nationwide, investors sold nearly 95,000 “home flips” in the third quarter of 2021, according to ATTOM, a website that tracks the home flipping industry.
Median profits on each flip have also increased, according to ATTOM data, to $63,500 in the third quarter of 2021.
In all, home flips made up about 5.7% of the total residential real estate market in the United States.
Alex Krumm, a past president of local Realtor association and broker/owner at NextHome Excellence, said he doesn’t believe flippers are finding many deals on the local Multiple Listing Service, a database used by real estate agents across the country, as home sellers know how hot the real estate market is in the area.
Realtors do see some homes that are being flipped on the market, but not nearly at volume as the area once had. The housing boom of the early 2000s saw a surge of home flippers in the local market, according to an investigation the Herald-Tribune published in 2009. After the housing crash, many got in trouble with upside down properties, and some were charged with fraud.
However, today’s local real estate market is vastly different from the housing crisis that led to the Great Recession. Fewer banking regulations and highly speculative investors fueled a housing bubble largely built on credit.
Real estate analysts today point to sky-high demand and a historically low number of homes on the market as drivers of the current price surge, which has dampened easy flipping opportunities.
Doug Beck, a Sarasota resident that still operates a flipping business in the New Jersey area, said the profit in a home flip is almost always made on the purchase.
This means that flippers need to find properties below market price and “that need the work” that will allow for renovation and eventual profit.
Beck said deals are more often found from motivated sellers in need cash quickly or who don’t want the invasion of privacy that can come with publicly listing property for sale.
This sometimes happens after deaths or during divorces or in times of financial stress.
Krumm said that he believes flippers play a role in the local real estate market.
“They take tired properties and make them fresh,” he said.
Craig Cerretta, managing broker at Premier Sotheby’s International Realty, said in the current market buyers know they will have to pay top dollar “and don’t mind doing so if the property is move-in ready and has been updated.”
He said that, particularly in the luxury market, opportunities exist as there are higher margins. “It’s not as easy as it used to be, and you have to be smart and efficient.”
Kasten and Beck echoed Ceretta’s thoughts on the luxury market having opportunities for home flippers.
Beck pointed to a recent sale earlier this year. His company, New Jersey-based JDL Ventures, bought a fire-damaged home for $600,000. He said they made a $500,000 investment in renovations and sold it for nearly $1.4 million.
Still, despite the recent success, Beck tells people who want to get into the business now that it may not be the best idea. He instead says home flippers may want to look into becoming landlords.
Kasten said he owns at least five properties in the area, renting out some on Siesta Key as vacation rentals.
He also said Sarasota does present some opportunities with some of the older waterfront condo buildings in prime locations where it is possible to purchase a unit for a bit above a million dollars. It’s possible to do a full renovation for about $250,000 then sell the property for near $2 million.
High price tags will push out many smaller investors from the home flipping model. “The price for poker has gone up in the flipping game,” he said.
Beck said that the hot market does help, though. If a flipper does eventually buy and renovate the property, it is easy to offload it.
“If you get it to the finish line, typically, you’re golden, as the market will sell it for you,” he said. “It’s getting it there that’s the hard part.”
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