Investing in a fixer-upper for resale can be a great decision, but there are a lot of factors at play. Your level of profit –or even whether you come out ahead- depends a great deal on the market you’re in.
The best places to flip a home share a combination of characteristics:
Low prices
It makes sense to rehab properties in a market where homes are relatively affordable. This can often be due to a high number of distressed properties and foreclosures in the market. It can also be a function of the economic trends in that particular area.
Many experts recommend buying in a market that is about to bottom out. If you can get the timing right, the purchase price will be low and the resale considerably higher.
High Demand
The best deal in the deal won’t generate returns if you can’t sell the property. Buying in markets where there is a high demand for residential property naturally boosts your chances of getting your target resale price in a timely manner.
At the same time, markets with high demand generally have higher prices as well. This is where distressed properties can be especially helpful. Keep in mind that the competition for these will likely be fierce.
… and Others
There are other market characteristics that affect how successful a flip will be in a given location. For example, strong job growth bodes well for the housing market, so cities that are adding jobs and population may be good candidates.
Neighborhoods that are experiencing renewal or where infrastructure or attractions are being improved are also a good bet. Good area schools are another factor that build a property’s value.
24/7 Wall St. generated a list of US cities that are fertile ground for flippers, using data from RealtyTrac. Here is a recap of their top ten:
10. Jacksonville, FL
· Return on investment: 79.9%
· Avg. gross profit: $53,300
· Avg. flipped price: $120,000
· Flips, pct. of home sales: 7.9%
9. Allentown-Bethlehem-Easton, PA-NJ
· Return on investment: 80.0%
· Avg. gross profit: $64,000
· Avg. flipped price: $144,000
· Flips, pct. of home sales: 4.4%
8. Knoxville, TN
· Return on investment: 81.2%
· Avg. gross profit: $56,850
· Avg. flipped price: $126,850
· Flips, pct. of home sales: 5.6%
7. York-Hanover, PA
· Return on investment: 83.6%
· Avg. gross profit: $63,700
· Avg. flipped price: $139,900
· Flips, pct. of home sales: 8.5%
6. Baltimore-Columbia-Towson, MD
· Return on investment: 84.8%
· Avg. gross profit: $91,542
· Avg. flipped price: $199,500
· Flips, pct. of home sales: 6.8%
5. New Haven-Milford, CT
· Return on investment: 89.6%
· Avg. gross profit: $90,950
· Avg. flipped price: $192,500
· Flips, pct. of home sales: 3.0%
4. Cincinnati, OH-KY-IN
· Return on investment: 89.7%
· Avg. gross profit: $54,235
· Avg. flipped price: $114,700
· Flips, pct. of home sales: 5.6%
3. Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
· Return on investment: 98.4%
· Avg. gross profit: $84,788
· Avg. flipped price: $170,988
· Flips, pct. of home sales: 5.7%
2. New Orleans-Metairie, LA
· Return on investment: 99.2%
· Avg. gross profit: $74,700
· Avg. flipped price: $150,000
· Flips, pct. of home sales: 6.1%
1. Pittsburgh, PA
· Return on investment: 129.5%
· Avg. gross profit: $71,250
· Avg. flipped price: $126,250
· Flips, pct. of home sales: 3.2%
This article was originally published on Equities.com on September 21, 2016.
