Study: Real estate flipping a profitable venture in Sonoma County

  • Victor Miranda coils an extension cord after a day of work at a home flip project in Windsor, Calif., on March 13, 2013. (Alvin Jornada / The Press Democrat)

As home prices rebounded in Sonoma County last year, real estate investors jumped into the market and flipped hundreds of properties for hefty gains, according to a new study.

One in 10 homes sold in the county last year was purchased and resold within six months, a common definition of flipping, according to the study by RealtyTrac, a real estate information firm.

Last year, 527 single-family homes were sold twice within six months, increasing 47 percent from 2011, RealtyTrac reported.

Investors poured into the local housing market for good reason: Sonoma County was one of the most profitable places in the country last year to buy a home, fix it up and sell it, according to RealtyTrac.

The study, which measured the average spread between the purchase price and the sales price of flipped homes, ranked Sonoma County 17th among more than 600 metropolitan areas. The top 25 communities included San Diego, San Jose, Sacramento and San Francisco, as well as Las Vegas, Phoenix and Miami.

"I think the number one reason they're on the list is because of rising home prices," said Daren Blomquist, a vice president at RealtyTrac.

The company estimated that Sonoma County's median home value increased 16 percent for the 12 months ending Feb. 1. Among the top 25 communities, the annual increase ranged from 9 percent in Nashville, Tenn., to 33 percent in Phoenix.

Flippers paid, on average, $285,344 for a house in Sonoma County and resold it for $338,903, producing what RealtyTrac called a "gross profit" of 19 percent.

Local home flippers were quick to point out that actual profit margins are much smaller, after including the cost of renovating and reselling a property. In Sonoma County, the older housing stock requires greater investments than in many communities that also had large numbers of foreclosures, they said.

If the county was ranked on net profit, "it would be way down there because the houses in Sonoma County take a lot more to fix up," said Chris Peterson, a managing director of Praxis Capital in Santa Rosa, which buys properties for both rentals and for flipping. "The net margins are very small in Sonoma County."

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