Real-estate flippers are focusing on high-end properties, because the market for flipping lower-end housing is no longer as profitable. In 2012, the number of houses flipped valued at more than $1 million increased by 35% over the previous year.
Rising prices and tight inventory are driving more investors to the upper end of the market, the Wall Street Journal reports. Foreign buyers, institutional investors and professionals that previously made money in other industries are now speculating on luxury real estate.
Flipping high-end homes can be particularly challenging. Selling a luxury property can take longer than a midprice home, and renovation costs can be steep, because high-end buyers expect to be wowed. Plenty of flippers have lost money. RealtyTrac data show that in Naples-Marco Island, Fla., for example, flippers who purchased homes for $1 million or more lost 14% of their investment when the property sold within six months.