A sixth-generation Orlando resident and a Kissimmee real-estate agent are among those profiting — sometimes handsomely — from the quick-turnaround resale of Central Florida homes to private-equity companies and other investors eager to take advantage of the region’s recovering housing market.
With about half of all resales these days closing as cash deals, and a quarter of all properties going for more than their asking price, the region’s house “flippers” have been selling hundreds of homes and condominiums in the past year to equity companies and institutional investors, as well as to regular homebuyers, an Orlando Sentinel analysis of commercial-real-estate data has revealed.
Local radio ads now advertise: “Do you want to make a ton of money buying and flipping houses?”
The real question, though, may be: How much longer can the investor frenzy continue?
“Right now a bubble is not a serious concern, but we can’t sustain the 20 percent price gains,” said Ron H. Richards, whose family has been in Orlando for generations and whose company is now one of the most prolific flippers in the region. “We saw a nice spike in prices, but a lot of the larger groups are not finding the returns they thought they would.”
Home-sale profits have been easy to come by in the past 18 months. The median price of existing-home sales in the core Orlando market has increased from $108,000 at the beginning of last year to $145,000 as of April.
Flippers, though, have profited further by following the adage: Buy low and sell high.
For example, Richards and a partner have been buying and selling 30 to 40 investment properties a month throughout the greater Orlando area, with a concentration in the Pine Hills section of Orange County. Their 3-year-old company, Altura Investment Realty, uses cash collected from local investors and the proceeds of previous housing “flips.”
The Sentinel analysis of 3,400 local sales records from January 2012 through April 2013, supplied by real-estate-research company RealtyTrac Inc., shows that Richards and others are selling properties for a median price 50 percent more than what they paid for the house less than six months earlier. A review of 30 flips by Richards’ group shows it paid a median $41,178 for the houses and sold them for $74,000 — after covering costs for repairs, renovations and other expenses.
Richard’s group sometimes unloads newly acquired houses within a few days of buying them. Other times, it invests $15,000 to $20,000 in what he described as a “nice, cosmetic makeover.”
Others profiting from the recent run-up in Central Florida home prices include Kissimmee real-estate agent Fernando Homs. He purchased and sold 52 houses last year and expects to flip about 75 to 80 this year. A review of 20 of his recent sales shows he paid cash for single-family homes, most of them in Kissimmee. His midpoint purchase price was $41,156, but he sold them — mostly to regular homebuyers, often from New York or Puerto Rico — for a median price of $131,000. Getting 10 to 12 offers on each house is not uncommon, he said.
“Most of the houses I buy, we do new laminate floors, kitchen floors, granite and kitchen appliances. We put in $20,000 to $38,000 and do the whole renovation — inside and out,” Homs said.
The goal, he said, is to earn a $20,000 profit per house, though that can shrink to as little as $8,000 to $10,000. A profit margin can sometimes be eroded, he said, when an appraiser determines that a house is worth less than the agreed-upon sales price.
Homs said that, as of last week, he was holding 10 properties, and he does worry about getting caught in a market bubble, particularly if interest rates rise and the equity funds buying up houses turn elsewhere for more-promising investments.
The biggest buyer of flipped homes in the four-county Orlando metropolitan area has been an investment group affiliated with Blackstone Group LP, a publicly traded company that is one of the world’s largest private-equity firms.
A review of 57 recent Central Florida home purchases by the New York-based investment group found that it chose to deal with a broad pool of sellers rather than one source. The group paid a median price of $110,950 for the properties, which ranged from Leesburg and Clermont to Apopka and St. Cloud, though one-third of them were in Kissimmee. Blackstone did not return calls seeking comment.
Purchases by investors are expected to slow during the next year. A survey released last week by ORC International, a market-research company, found that 48 percent of those questioned expect to buy fewer properties during the next 12 months. When a similar survey was released in August, only 30 percent expected to start cutting back on their activity.
Having Blackstone and other well-financed groups swooping through housing markets such as Orlando’s worries some experts.
“The No. 1 concern with institutional investors is that they control big swaths of real estate and, if they decide at some point that it’s time to sell, how that’s going to affect these markets,” said Daren Blomquist, vice president for RealtyTrac. “To me, it always makes me nervous when there are large corporations that control big pieces of real estate. It’s like Shadow Inventory Part II.”
Shadow Inventory Part I has been the supply of houses in foreclosure or owned by banks but not yet listed for sale.
Two things could temper worries of another real-estate bubble popping: The market currently has a shortage of homes listed for sale, so it could probably absorb a bunch of new listings without spiraling into an oversupply. Also, rents have not declined as the real-estate market recovers, so investors are still making money by leasing their properties.
At least for now, regular homebuyers can expect to continue having to compete with both flippers and cash-wielding investment groups.
“The Orlando investor market is one of the savviest and [most] aggressive in the country,” Richards said. “Homes are going for the highest and best prices, very fast, and you better have your pencil pretty sharp.”
mshanklin@tribune.com or 407-420-5538