With house-flippers earning an average gross profit of $63,500 per transaction, it might be worth knowing where to go – and where not to go – to get the best bang for your buck.
The personal-finance Website WalletHub has released its report on 2021’s Best Places to Flip Houses, comparing more than 170 U.S. cities across 26 key metrics. The data set ranges from median purchase price to average full home-remodeling costs to real-estate agents per capita.
The verdict? Sioux Falls, S.D., is the top spot for house-flippers, followed by Missoula, Mont.; Peoria, Ariz.; Nampa, Idaho; Tampa; Mobile; Boise; Rapid City, S.D.; Gilbert, Ariz.; and Knoxville.
On the other side of the coin, for a variety of reasons but often due to high acquisition costs, Oakland was determined to be the work city in which to flip a home, followed by Yonkers, N.Y.; San Francisco; Bridgeport, Conn.; and Los Angeles.
The District of Columbia checks in at No. 100 on the survey. Among Virginia localities, Virginia Beach was 16, Chesapeake 46, Norfolk 81, Richmond 89 and Newport News 98 of the 171 communities surveyed.
How was the rating formulated? Communities were ranked backed on the market potential of housing; the cost of renovation; and their quality of life. (Find the complete list at https://bit.ly/3iXH1EZ.)
Want to make sure your flip isn’t a flop? Be prepared for any eventuality, the experts say.
“The most common mistakes are underestimating the costs and the time involved for a successful flip,” said John Sobota, a faculty member at the University of Wisconsin-Stout. “Some of the most successful house-flippers are very organized, can maintain a budget, must be familiar with their market and must not be afraid to take a risk. Just be willing to adapt when plans change. If the property does not sell, then you can rent it out.”
Brittany Cousins, a professor of economics at Duke University and herself a house-flipper, warned potential flippers to take off the rose-colored glasses.
“Especially as the popularity of ‘fix-and-flip’ shows have grown, people believe that flipping a house is an easy way to make a great deal of money quickly,” she said. “I remember the first house I ever flipped I purchased on a Friday, and actually thought I could be finished the following week. Three months later it was finally ready.”
“While it is sometimes possible to do a few cosmetic repairs and earn a handsome profit, investors should beware of their own optimism,” she said. “Older houses, in particular, may have a lot of charm; however, a new coat of paint cannot solve a structural problem or make up for obsolete plumbing or electric wiring.”
Some other fun factoids from the data:
• Pittsburgh has the highest average gross return on investment, 128.12 percent, which is 9.4 times higher than in Raleigh, N.C., the city with the lowest at 13.64 percent.
• Montgomery, Ala., has the lowest median purchase price, $60,000, which is 15.3 times lower than in San Jose, Calif., the city with the highest at $920,000.
• Memphis has the highest share of home flips, 11.95 percent, which is 6.1 times higher than in Portland, Maine, the city with the lowest at 1.95 percent.
• Charleston, S.C., has the most real-estate agents (per 100,000 residents), 247, which is 41.2 times more than in Worcester, Mass., the city with the fewest at 6.
• Little Rock has the lowest average full-home remodeling costs, $75,888, which is five times lower than in Atlanta, the city with the highest at $375,734.
House-flipping is not for the faint of heart. Nor is for those without experience, said Daniel Huerta-Sanchez, an assistant professor of finance at Florida Gulf Coast University.
“The ideal house-flipper should have a combined knowledge of finance and construction,” he said. “Flipping homes requires that your numbers are correct and that you are knowledgeable enough to know that the work performed on your property is being done correctly.”