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Thursday, June 19, 2014

Bayview Flippers Cashing in Big

The folks at Redfin.com looked at neighborhoods in each market across the country to see where house flippers walked away with the biggest gains in 2013. For this analysis, they defined a flip as a home that was purchased and then sold again within 12 months.  While San Francisco ranked highest in the country overall, the Bayview in particular was found to be the #10 neighborhood IN THE COUNTRY for flippers, with an average gain of $196,200 per flip!  Visitacion Valley came in at #14 with an average of $180,000.

Flippers tend to look for houses that have good bones but haven't been updated in a while, and my suspicion is that in the Bayview and Visitacion Valley, there may be more of these kinds of homes than in other parts of the city.   These neighborhoods have also seen a disproportionate number of foreclosures, so these houses may be even more distressed and sell for less than they would in a regular sale, making flipping them even more profitable.

To stifle flipping, a proposed ballot initiative by Supervisors Avalos, Campos, Kim, and Mar could hit San Francisco house flippers with huge tax, beginning at 24% if the home is flipped within the first year, scaling down to 14% after five years.  My fear with this kind of tax is that it won't take into consideration people who aren't flippers but who have to move after a short time in their home.  We'll have to see what kind of nuance in the ballot initiative.

I'm also not sure that flipping is always a horrible thing.  Homes that typically get flipped are in disrepair and in those cases are a nuisance to the neighborhood.  Speculation is also a risk to the flipper, and though likely, it's not like they're guaranteed a huge profit.  Also, if its not the flipper's primary residence, they still have to pay federal income tax on the profits.

Of course, there's also the so called bidding war trend that blew up in the media recently with the $316K over-asking price sale of 1574 Innes Ave.  While not a flip (it was last sold in 2007), it goes to show the power of a good remodel in increasing your home's value (both real and perceived).

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