Investment firm KKR is making an even bigger bet on home flipping.
KKR has already invested $250 million in a company that buys short-term loans to real estate investors who buy, renovate and resell homes, and now it's investing another $250 million in New Jersey-based Toorak Capital Partners.
The increase in investment comes as a result of an attractive environment for buying, renovating and reselling homes — there are still plenty of homes in need of resale refurbishment — and relatively high home prices mean there is potential for profits.
“You can buy low and sell high,” said Bridget Brust, owner of Philadelphia real estate brokerage Space & Co. “It's the best time to resell in five years,” she said, explaining that about 20 percent of her business comes from resales.
Susan Wachter, a real estate professor at the Wharton School of the University of Pennsylvania, said cities with lots of older homes and job growth, such as Philadelphia, have the most active resale markets.
“It's a natural market where you can make easy money,” she said.
About 11% of homes sold in the fourth quarter of 2018 were resales, or homes that were flipped within two years, according to CoreLogic. But resales still pose big risks, said Ralph McLaughlin, chief economist at CoreLogic. He said home price growth has halved in West Coast cities such as Seattle and San Jose, leaving resellers losing money.
“The percentage of property resales that are losing money is approaching 20% to 30%,” he said.
McLoughlin said the company was responsible for more than 40 percent of resale property sales at the end of last year, the highest on record.
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