Investors in the South would rather rent than flip, online auction company's survey reveals

Contemporary styling cues mark the stucco-sided house at 300 Ocean Oaks Court on Kiawah Island, which went up for auction Oct. 7. The auctioneer said at the time he was worried that investors would try to buy the property for a low price and "flip" it (Provided).

Property shoppers nationwide who buy at auctions currently prefer to rent out their properties than sell them to make a quick sales profit - known as flipping.

Moreover, Southern states are the most likely to lease the homes, townhomes or condos, with just more than 40 percent looking to flip.

The findings stem from Auction.com LLC's Real Estate Investor Activity Report for November, which was released last month.

"Real estate investors appear more likely to flip a property in those regions where home values are higher," says Rick Sharga, Auction.com executive vice president.

"Higher prices can translate to a faster and potentially more significant short-term return on investment," he says.

"The hold and rent strategy seems most popular in markets where home prices are lower, allowing investors to charge a more competitive monthly rental rate and still produce reasonable returns over an extended period of time," Sharga says.

California-based Auction.com, which calls itself the nation's leading online real estate marketplace, says the survey polled real estate investors bidding on properties offered for auction during November.

"This research provides insight into real estate investment trends on both a national and regional level," Auction.com notes.

The figures suggest "that purchasing property to rent is more prevalent in the Midwest and South, whereas there appears to be a higher propensity for flipping among real estate investors in the Northeast. The flip versus rent split is nearly even in the West," Auction.com says.

According to the regional breakdown, 57.1 percent of investors in the South are inclined to rent compared with 40.5 percent likely to flip and 2.4 percent undecided.

The Midwestern states are next highest for renting at 51.8 percent, followed by the West, 50.5 percent and Northeast, 41.9 percent. The Northeast has the more sizable share of flipping investors at 54.1 percent with the West at 49.5 percent and Midwest, 43.5 percent. The Midwest produced 4.7 percent of investors who are undecided, with the Northeast at 4.1 percent and the West, 0 percent.

Nationwide, 54 percent favor renting investment property, 43.3 percent would chose to flip and 2.7 percent aren't sure.

According to the venture, people who say they were making a making a one-time purchase favor renting over flipping by nearly 3 to 1 while real estate investors are slightly more supportive of renting out properties than selling them right away. By contrast, 60 percent of people who indicated they were working on behalf of another investor favor flipping.

Auction.com says the findings, based on responses given at online auctions, "show that investors bidding online generally tend to hold properties to rent rather than flipping them."

By contrast, "Investors bidding at live events appear to be more likely to flip the properties they purchase," the company says. "Respondents at live events in the Western states such as California, Arizona and Nevada showed an overwhelming preference toward flipping."

Exceptions were live auctions in three Southern states, Georgia, Tennessee and Texas, in which the majority of investors favor holding properties for rental income over selling them at a gain.

Flipping was a more popular strategy among investors, such as institutions, who are buying 50 or more properties a year, the venture points out.

Auction.com LLC, founded in 2007, says it has sold more than $26 billion in residential and commercial real estate assets in the past eight years. The company employs more than 900 people in Irvine and Silicon Valley, Calif.; Austin and Plano, Texas; Atlanta; Denver; New York; and Miami.

For more information, visit www.auction.com.

Reach Jim Parker at 937-5542 or jparker@postandcourier.com.