Data shows that high-end home flipping was big business last year. Who is breaking the misconceptions about flipping houses? What are they doing differently? How can more individual investors reap multi-million dollar rewards like those operating at the top of the market?
Flipping Houses Isn’t Just for the Little Guy
While wholesaling and fixing and flipping houses remains an easy entry point into real estate, new information shows that a new investment strategy is increasingly being used by the ultra-wealthy. Wholesaling and rehabbing houses can certainly still be used by those who are starting out, but transaction records from 2015 show that these investment strategies are being used by those that already have millions in the bank. This provides proof for those that have often debated whether flipping houses was just a short term amateur strategy, or a sustainable long term investment vehicle.
Celebrity Home Flips
Numerous celebrities have turned to flipping houses to supplement their already massive income. We aren’t just talking about reality TV either; A-listers like Ellen, Jennifer Anniston, and others are joining the trend. Then there are those which may be accidental (or on purpose flippers), like Kanye West and Kim Kardashian. They are making hundreds of thousands, millions, and even over ten million a pop. Several of these high profile deals in California have made it into the media.
Fund Managers and High Level Executives
Hedge fund managers and CEOs seem to be interested in flipping high-end homes, too. Even though they are best known for running media companies, picking stocks, mergers and acquisitions, and juggling other people’s money in the market, public record data shows many of these financial gurus are making a lot of their personal money from flipping houses, condos, and co-ops in New York City. New data from Property Shark shows that many flipped or bought houses with $10 million profit markups. Others scored multi-million dollar discounts, and some immediately put properties in the tens of millions of dollars range immediately back on the market after buying them. Then there are those that have bought into some of the most expensive new developments to be built with the anticipation of flipping them for mega-bucks. When you see the family members of famous rock stars, heads of the top private equity firms, and others engaging in this type of investment, few would think they need the money. Often times they do it for fun, and for bragging rights at the dinner table. Others are certainly doing it to multiple their wealth and move up the rankings lists, while having a strong income plan for when they are retired from their corner office positions.
Commercial Real Estate
It seems that paying tens or hundreds of millions for a property isn’t a big deal in the commercial real estate arena. Manhattan and Brooklyn retail and multifamily properties sell for this much on a regular basis. Sometimes value is added by the market itself; other times it is in securing new long term tenants. Yet, for others, it is strategically piecing together several parcels to create a bigger footprint on which to build a dramatic new complex. At its core, it is all a form of flipping, at the very top of the game.
How do the Wealthy Flip Differently?
There are a number of ways that high-end flippers do things differently than those just starting out:
- Use partners to pool capital together
- Use Realtors and property managers
- Use the best designers when rehabbing properties
- Aren’t afraid to work off-market and let buyers seek them out
- Seek prime properties in the best locations, versus just what is cheapest
- Use LLCs for privacy and protection
How to Join in the Success
Whether you are starting with nothing, or with billions, there is a lot that individual investors can do to participate in this type of success. It starts with learning and real estate education. There are clearly a number of factors which can be adopted by the most successful, as listed above. However, perhaps most importantly, it is about adopting the right mindset; that is flipping and wholesaling properties is an investment tool that is equally for professionals and billionaires for the long term, as it is for those just trying to catch up.
