It looks like house flippers in Las Vegas hit a profitability snag in this year’s second quarter. According to real estate analysis firm RealtyTrac, the average gross return on investment for a Las Vegas flip was negative 4 percent. That puts our city at No. 2 on RealtyTrac’s list of the top 10 worst flipping markets.
San Francisco was the only other metro area that was upside-down, logging a negative 9 percent ROI on average. RealtyTrac defines a flip as a property bought and sold within 12 months. The current national flip profitability average is 21 percent, and—believe it or not—Pittsburgh is today’s hot spot with a profit average of 106 percent.
Local flippers are feeling the pinch of more modest home-value appreciation, says Daren Blomquist, a RealtyTrac vice president. “Las Vegas is a hard market. It seems to either be on fire in a good way or bad way,” he says. “Now, with boring old single-digit appreciation, things seem out of the norm for flippers who were not prepared for that.”
Flippers are also pinched on the sales side by some credit tightening and conservative overall lending practices, Blomquist says. When dealing with valuations of flip properties, some lenders request a second appraisal. A bank will only lend up to a certain percentage of the appraised—not agreed upon—price. And a low appraisal can kill a sale.
Despite this seemingly negative news, Las Vegas should continue to be a flipping hot bed. Consider these stats: During the second quarter, 8 percent of home sales here were flips, and since 2011, an average of 8.9 percent have been flips—that’s nearly double the national average of 4.9 percent. This is not to say that the flipping game is for everyone. Blomquist’s warning to amateurs looking to make a quick buck: “You just have to be so much smarter if you’re going to be successful.”