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It’s the housing industry’s own special recipe for the American Dream. It goes like this: Buy a distressed place for a song. Mix in some sweat, a whole lot of paint, and loads of improvements. Shake well. Relist, sell hard, and then make a big profit off your investment in no time flat!
Take a nice vacation. Rinse and repeat.
In a strikingly short time, home flipping has made a remarkable transition from a vaguely sketchy get-rich-quick plan to a way of life for ever-increasing numbers of Americans. Back in the hazy, crazy days preceding the housing collapse, it was all about swooping in to buy properties on low or no credit, and reselling them fast without adding much value—or adding them to already swollen housing portfolios. Now it’s turned into a sustainable, value-driven business, one with proven methodologies, a handful of national superstars, and a seemingly endless number of bingeworthy shows like “Rehab Addict” and “Beach Flip.”
Flipping is back, better than ever. And more and more people are again getting into the game. The number of flipped properties this year reached its highest level since pre-crash 2007.
“Flipping activity is hot again, due to the fact that we are seeing strong price appreciation, driven by strong economic and demographic demand,” says realtor.com®’s chief economist, Jonathan Smoke. “It’s up in markets where prices are at new record highs. It’s also up in markets where there remain undervalued homes.”
Flip, don’t flopBut where can you find these diamonds in the rough—and polish them up without burning through too much cash in the process?
To find out, we put our flip-tastic data team on the case.
We started by ranking the largest 100 markets by the ratio of flips to all home sales. We defined a flip as any home—single-family, townhome, or condo—that was bought and resold within a 3- to 12-month period. We excluded the deals that ended in foreclosure or had a negative profit compared to the original purchase price. We filtered out homes that were bought and sold by banks or other government entities. And we ruled out active markets where the renovation costs eat up all the profit (we’re looking at you, Bakersfield, CA!).
And we wound up with Americas most flipworthy areas!
We chose to feature no more than two cities per state, because otherwise, these hot spots would be clustered in only a couple of states (cough, Florida; cough, California). Along with the map, we pulled out the key metrics for each top market and painted a picture of the real estate scene. We also interviewed expert investors and Realtors® to find out the top features that local buyers want.
Got it? Ready, set … flip!
Ratio of flips to all home sales: 4.0%
Median flip profit: $45,830
Median list price of all homes: $262,000
What buyers want: New roofs, new air conditioning
Home flippers are returning to Southern Florida en masse. Since many homes during the last burst of housing speculation ended up in foreclosure in the subsequent bust, Deltona has no shortage of fixer-uppers that could use some—or a lot of—TLC.
“Many of those homes need intensive rehab work throughout the house. Flippers who are looking for a serious fixer-upper, generally with a concomitant discount on price, will find more of that kind of inventory in Deltona,” says Brad Hunter, chief economist of HomeAdvisor.
2. Stockton, CARatio of flips to all home sales: 3.9%
Median flip profit: $71,050
Median list price of all homes: $355,000
What buyers want: Granite countertops, granite countertops, granite countertops! (Did we mention granite countertops?)
Stockton was ground zero for the foreclosure crisis, but the market has made a 180-degree turn since the city emerged from bankruptcy last year. For 18 months straight, Stockton has been ranked among the 20 hottest markets in the country. Because it’s within striking distance of the Bay Area—about a 1.5-hour drive from either San Francisco or San Jose—it’s a reasonably priced alternative to those cities for home buyers. The wide swaths of foreclosure homes translate into opportunities for investors and affordability for median income earners. In September, a typical home took only 41 days to find a buyer.
3. Nashville, TNRatio of flips to all home sales: 3.8%
Median flip profit: $48,500
Median list price of all homes: $330,000
What buyers want: Hardwood floors, stone countertops, classic design details
The booming job market and swelling home prices in Nashville have reignited the love for fixer culture in this Southern mecca. In a nutshell: Nashville is totally flipping out. The epicenter for the movement has been East Nashville, which, not so coincidentally, is also the city’s cultural heart. In just a few years, the neighborhood has been completely transformed.
“In areas nearby, you can still find bargain homes and historical homes that are good for flipping,” says Troy Dean Shafer, a professional renovator and star of “Nashville Flipped.” “The appeal of Nashville is that you have these little pockets of homes that are spread out in the city.”
4. Tampa, FLRatio of flips to all home sales: 3.6%
Median flip profit: $50,500
Median list price of all homes: $240,000
What buyers want: A complete turnkey property that doesn’t need any work at all
In Tampa, steadily climbing home prices + distressed homes left over from the recession = a big spurt of flipping activity in 2015.
The beautiful oceanside location, mild weather, plus a steadily improving job market (the 4.6% unemployment rate is well below the national average), have helped to make Tampa a top relocation city. Baby boomers are moving there in hordes, and so are millennials. As the number of homes for sale declines, investors have regained confidence in rehabbing homes for profit.
5. New Orleans, LARatio of flips to all home sales: 3.5%
Median flip profit: $78,300
Median list price of all homes: $252,000
What buyers want: “Wow” factor
The city’s many flooded, abandoned, vandalized, and gutted homes after Hurricane Katrina in 2005 have become magnets for investment. Prices have rocketed up 26% in a single year. On HGTV”s “Small House, Big Easy”, star investor Sarah Martzolf is on a mission to revive New Orleans’ signature “shotgun” homes—the narrow, rectangular houses that often date back to the 1920s. There are plenty of other types of homes to revive here as well, and the demand is so huge that there’s even a Meetup group dedicated to teaching novice investors about home flipping.
6. Los Angeles, CARatio of flips to all home sales: 3.0%
Median flip profit: $89,000
Median list price of all homes: $675,000
What buyers want: Everything new—from the bathroom vanity to the sprinkler system
You know flipping is good business when celebs are getting in the game. Corbin Bernsen, who played a rakish divorce lawyer on “L.A. Law,” now plays a flipper in real life, with 20 homes under his belt, according to the Los Angeles Times. His most recent gig, a Mid-Century Modern home in Sherman Oaks, was sold for $1.65 million in June—$375,000 more than what he paid for it a year ago. Good one, Corb!
With a median home price of $673,000, L.A. is not typically a place where badly distressed homes abound. But as veteran investor Nick Manfredi with the Manfredi Group points out, it’s not the price, but the market trend that really matters.
“When prices go up, people’s perception is that the market is doing well, so demand will go up,” Manfredi says. “If a neighborhood has a lot of buying and selling activity going on, I don’t care if it’s $1 million or $2 million, I know it will move along quickly.”
7. Knoxville, TNRatio of flips to all home sales: 2.8%
Median flip profit: $58,450
Median list price of all homes: $223,000
What buyers want: Easily accessible neighborhoods, top-notch heating and air-conditioning systems
As Tennessee beats the national average in job growth, Knoxville is riding the crest of an economic recovery. In the past year, home prices have gone up 13%, and the number of homes for sale dropped 20%—a cue for real estate investors to get busy again!
“In 2010, when the market crashed, I was sitting on 38 properties thinking: What am I going to do?” says Chuck Ward, owner of Chuck Ward Real Estate Investments. “The market has come back strong since 2014, and has been good for two years now.” Ward says his six-member crew remodels between 30 to 40 properties a year.
8. Providence, RIRatio of flips to all home sales: 2.7%
Median flip profit: $76,000
Median list price of all homes: $311,000
What buyers want: Historical homes rich in architectural details, given a new life
When housing competition in Boston went from bad to horrendous, homeowners and investors turned their attention to the Rhode Island market. The Acela express train takes commuters from Providence to Boston in just 33 minutes. The median list price in Providence is $311,000, only two-thirds of what Bostonians pay. Providence also has a good supply of foreclosures, although the number has already started to drop, according to Realtor Joseph McCarthy.
“In the past nine months, flipping investors are willing to pay more on a property, with the fear that they won’t be available in the future,” McCarthy says.
9. Phoenix, AZRatio of flips to all home sales: 2.6%
Median price gain: $42,500
Median list price of all homes: $300,000
What buyers want: Starter homes with a neutral color scheme
In 2016, three global firms—hardware manufacturer Kudelski Group, specialty materials company Rogers Corp., and construction material producer Carlisle Companies—all announced plans to move to Phoenix. It’s further proof of the transformation of this city from the land of back-office and customer-care centers to a new mecca for corporate headquarters. As new jobs bring in more people, more homes will be needed. Hello, investors!
“New home builders in Phoenix are building luxury homes; they don’t build homes that are smaller than 1,500 square feet,” says real estate analyst Tina Tamboer with the Cromford Report, a residential real estate publication. “So it’s a good opportunity for flipping investors to fix up older, smaller homes and sell them to first-time home buyers.” Those flips are usually located in West and South Phoenix.
10. Denver, CORatio of flips to all home sales: 2.5%
Median flip profit: $42,500
Median list price of all homes: $480,000
What buyers want: Nice kitchens and bathrooms
Denver’s housing market is blazing. A three-year run of double-digit gains had many real estate investors chasing the rainbow into north Denver. Now they’re on the prowl for more untapped areas. In southwest Denver, which is the last haven for those seeking urban affordability, newly renovated homes have been popping up everywhere.
Much of the low-hanging fruit—those cut-rate foreclosure homes—is gone, and investors have to reinvent their game, says local broker Steve Weaver. “Now you see quicker flips with less work,” he says. “Many are taking homes that are unlivable into just livable. They are investing less.”
The post Opportunity Knocks in the Best Cities for Home Flippers appeared first on Real Estate News and Advice - realtor.com.
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