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Housing Bubble 2.0: Flipping A Home In These 20 Cities Results In A 102% Average Return
When it comes to the US housing market, there are two clusters: an undisputed bubble among the luxury, bi-coastal or "flippable" markets, which serve a tiny portion of the population but a major portion of foreigners seeking to park illegal money in U.S. real estate, and a rapidly sinking market serving everyone else.
For the purpose of this post we are more interested in the first, "bubbly" segment, and specifically that unforgettable remnant of the old housing bubble which is alive and well right now: flipping.
According to RealtyTrac, in the third quarter there were a grand total of 43,197 single family homes and condos "flips" - units sold as part of an arms-length sale for the second time within a 12-month period - or 5.0% of all single family home and condo sales during the quarter. This was an increase of 18% from a 4.3% share in the third quarter of 2014.
As RealtyTrac further reports, the average gross flipping profit, the difference between the purchase price and the flipped price (not including rehab costs and other expenses incurred, which flipping experts estimate typically run between 20 percent and 33 percent of the property’s after repair value), was $62,122 for completed home flips in the third quarter. That was down slightly from an average gross flipping profit of $62,521 in the second quarter but up slightly from an average gross flipping profit of $61,781 in the third quarter of 2014.
The average gross return on investment (ROI), the average gross profit as a percentage of the average original purchase price, was 33.8 percent for completed home flips in the third quarter, down from 34.4 percent in the previous quarter but up from 32.7 percent in the third quarter of 2014.
But we don't care about the entire market. We only care about those markets where the Return On Flip (ROF) is highest.
Based on RealtyTrac data, among 101 markets with at least 75 single family and condo flips in the third quarter, those with the highest average gross flipping ROI were Pittsburgh (78.4 percent), New Orleans (73.1 percent), York, Pennsylvania (64.5 percent), Punta Gorda, Florida (61.3 percent), and Clarksville, Tennessee (59.6 percent).
Narrowing it down further, among zip codes with at least 10 completed flips in the third quarter with home price data available, those with the highest average gross flipping ROI were 21229 in Baltimore (136.0 percent) and 33063 in Tampa (130.2 percent), along with three Chicago-area zip codes: 60652 in the city of Chicago (120.4 percent), 60402 in the city of Berwyn (120.3 percent), and 60629 in the city of Chicago (115.2 percent).
The bottom line: the gross profit from a "flip" in any of these 20 markets will result in an average profit of just over 102% in as little under 7 months. Good luck.
Source: RealtyTrac
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I get why Chicago sales are so hot, but why aren't five zipcodes in Detriot on this list?
Detroit is the front line of the post-industrial renaissance in urban planning and community organizing.
Boris is lucky find job for flip burger. Is simple not have upper body strength for flipping of house.
(This is joke, pardon for Boris bad humor).
I don't understand why Americans still working. They just need to do real estate. Bob sells to Alice, Alice sells to Carol, Carol sells to Bob while everone making big profits ... rinse repeat. It's so simple, quit your job, all get rich.
The only thing that gets flipped around here is the bird.
I don't understand why Americans are still working…
It’s even easier than THAT… do like the Central Banks do:
You write a check to your neighbor for $10000, they write one to their neighbor for $15000… $100000… $2000000… Everyone’s a Billionaire (as long as NOBODY cashes out!)
Where have you been Boris? I have missed your witty posts.
Boris, flipping houses isn't like burgers, more like coins. Heads you win a bunch, tails you're bankrupt. It works until it doesn't
Detroit or New Orleans.
We is going to organize your ass.
There are still great values in Las Vegas
www.ViewLasVegasRealEstate.com
Real estate brokers are making a killing.
Invest your money wisely guys, 80% of you will be stripping by 2017.
Ha!Many of my clients were real estate brokers leading up to the (last) crash. Those guys litterally disappeared overnight when things went tits up. F'ing crickets. None of them invested their money wisely. They thought that ride would go on forever.. Had one with car still in service. Owed $11,000 or something close to that. Partial paid his bill with his gold/stainless Submariner that he bought with profits from his first property sale. Irony full circle.
Wall Street analysts cheered the move, which they say improves the quality of EQR’s real estate portfolio. But they note it also raises questions about whether the outlook for apartment properties — especially in the regions the firm is selling — is about to take a turn for the worse.
http://blogs.barrons.com/incomeinvesting/2015/10/26/why-is-sam-zell-sell...
schadenfreude
Las Vegas? Is that the city that used to have a nice big lake nearby?
Thanks for the SPAM Steve Hairless
Very interesting.
Baltimore sucks.
They are all shit holes. LOL
Parts of Vegas and North Las Vegas are as dangerous as Newark, NJ.
But at least they are diverse (not many of whitey around). That's what counts. Obama and the Obama Justice Department told me that.
I'm in the weatlhier part of Nashville metro (Brentwood/Franklin). Everybody and their brother flips houses here. All the idots who know nothing about it have been getting into over the past 6 months - and we all know what that means!
Is there anyone that does not understand that the only way to make money without doing anything useful is to draw down living standards, much faster than they were raised?
flipping and using inflated housing prices as an atm is not an economy.
when the rates go down, the price goes up. when the rates go up, the price should come down. The fed is killing all the fish in both directions. why is this still a mystery to anyone, unless they think they are profitting from the illusion?
that follow button on twitter/facebook is the herd. don't go that way, or not.
so, we give them a google phone, credit card and car, to get them the f out of the way.
the automatons are simply watching a loop between their brain and their body, getting ever more emotional, listening to voice in their head, as they short their conscience. Are you telling your brain what to do, or is your body telling you what to do. Media isn't all about sex and consumption by accident.
"the automatons are simply watching a loop between their brain and their body, getting ever more emotional, listening to voice in their head, as they short their conscience. Are you telling your brain what to do, or is your body telling you what to do. Media isn't all about sex and consumption by accident."
can we blame them for their (in)actions?
Maryland ...$645/day profit less costs to lipstick the pig, less Agent fees, less local fees and charges = a bad back and a CG tax bill.
Fuck that shit, your making everyone else money but it makes for a good story
Transaction costs of RE are yuuuuuuuuuuuuuuuuuuuuge. I already know three people who heard the commercials, attended those seminars and read a pamphlet and fell for this crap and thought they could make a million.
All three -- in their 50s -- lost their shirts and are now pretty desperate. In this job market they are toast.
All their savings ............................... gone!
They can't compete with the low wage Mexicans at the low end and they can't compete with the cheap labor H-1B visa people at the high end.
Painful seeing them these days.
Flipping a house that takes almost a year and only making $60k doesn't seem like such a great deal with quite a bit of risk. If you get lucky, time this right, and can do 5 a year would be pretty good. Last go around many of those people got slaughtered. Is anyone giving multiple construction loans to do this now or is this all cash?
can't wait for that bubble to burst
Ya I will take some gains but not further investing in RE. Just putting a few bucks in normalizing a market I began 17 years ago and praying we dont get nuclear conflageration. On that I am not an optomist but fairly certain our species goes on, albeit with 1/3 less people and a hell of a rebuilding process. Call Krugman he probably loves the idea.
An optimistic biologist I spoke to about what he thought would be coming in the future, back in 2005 when RE bubble was just starting, said he thought 90% of the population would be wiped out with a few different very realistic scenarios. None of it involved nuclear or wars. I was wondering what his pessimistic side thought was going to happen.
Buyers don't care what's behind the walls, just barf in some disgusting granite countertops and fuck off to the next flip.
Do you know nothing? You have to replace the hardwood cabinets with some particle board crap first. Unless the house has already been flipped a couple of times, then you just need to update the existing crappy fixtures with other crappy fixtures.
Ok, I lol'd. So true. I've walked through a few just recently as part of a soft search for a new abode. Pull open a drawer in the kitchen; hardwood caninets you say? Just the fronts, everything else is cheap particle board, stapled together, no dovetail, flimsy hardware. Wow, that's a nice brushed mickle shower head. Except it's just a thin wrap around shitty plastic that they bought at Home Depot that still has the "water saver" restrictor plastic insert. Geez, at least pull it apart and take that out so you get full flow. I love the "luxurious" tile floors, which are just prettied up cheap ceramic. Have you guys seen that plastic crap the try to pass off as trim? Romex everywhere, no conduit any more. Everything is flashed in plastic. Hollow core doors, barely 6" of unfaced batt insulation in attics, 2x4 exterior walls, it goes on and on.
Thinking about just building from scratch and general-ing it myself.
But the (dumb)masses eat this shit up and then wonder why their thresholds and windows are leaking, the house costs an arm and a leg to heat and everyone can hear the old man working one out in the bathroom.
Holy shit, are you me? I make the exact rant to all my gullible friends looking at those "nice new homes". I own a few properties that I renovated and rent out. I hand-built all the cabinets, built-ins and vanities from Baltic Birch and hardwood, use actual stone tile, etc. People don't appreciate nice things because they never learned the difference between "looks good" and "looks good and built well"...
If I see one more listing with "RECENTLY RENOVATED!!! BRAND NEW, BEAUTIFUL CABINETS AND COUNTERTOPS" courtesy of Home Depot or Lowe's I may start some adventures in arson.
The funny thing is when we shopped new kitchen cabinets the cheapest place I found used solid wood all throughout. Ikea was next cheapest. And Home Depot and Costco were the most expensive, more than double the cost on cabinets.
I don't think anything can touch quartz counters, if you actually cook food. If I just wanted looks I would do marble over granite. Our kitchen looks high end and was half the cost of Ikea and everyone that sees it wants me to update their kitchen.
Don't forget the mini cupcakes for open house day.
Banks paying zero percent. Put all your money into real estate now. Awsome returns! What can go wrong? /sarc
Did anyone notice that these are listed as some of the most corrupt places in the USSA?
As a landlord I'm getting a kick out of these replies. It doesn't take a rocket scientist to make money in real estate...
... as long as prices go up. Or - get this - just rent 'em.
Flippers - I could care less. Some will get rich, some will go broke. Some idiot will see shiny new fixtures and fuck themselves for the next 30 years to pay it off.
I'm in agreement, but like anything else, one must understand your craft to be successful. And that usually requires experience. The 15 yr marketing guru at the ad agency thinks he can make millions in real estate only to be eaten alive. Funny money from the fed distorts and makes it seam like a 'no brainier', but those without the brains are the ones who eat it hard. Some get lucky, sure, but that's just bc there's always a bigger fucktard will to hold the bag of shit next.
I agree. Although tenants seem to be getting more and more Obama-like. "I DESERVE your place for free so I'm not paying any more rent" and crap like that. Makes it tough.
Speaking of new fixtures: Last year I evicted some folks who hadn't paid their rent for over 6 months. Before they left, they poured concrete down every drain they could find.
And don't get the wrong idea - the guy I evicted was a stockbrocker.
Isn't there a big Scientology something or other in Clearwater? ripping off the not so "enlightened"
Just don't be the one left holding the bag. Again...
Surprised at how high housing has gone. It's insane.
Hmm... We're just bought a home in Bend, Oregon and are selling our home of 33 years on the Oregon Coast. It's 4 beds, 3 full baths oceanfront low bank sand beach recently remodeled with a brand new roof. We just lowered the price to $390,000. Our realtor said the article in the New Yorker about the Tsunami possibility screwed us.
The good news is the vacation rental market is doing well!
Because people didn't learn fuck all from the 2008 housing crash, we now have a raging bubble again in 2015.
I'm convinced people are fucking stupid as dirt.
It’s only happening because of cheap money, and it will keep happening until it doesn’t, at which point someone other than the ones doing it and profiting from it will pay the price for all the folly, same as it ever was. Thank you Federal Reserve.
Money doesn't look to be getitng more expensive any time soon...
The chart show 4 zip codes out of the 20, that are in Chicago. However the state of Illinois is either #1 or #2 at the top of people leaving the state of Illinois. Chicago is a shit hole with high property taxes. Jobs are leaving Illinois, people are leaving Illinois. Who put this chart together anyway? I'm not buying it.
Maybe you should get some "facts" before making statements.
Illinois population:
2000:12,419,293
2004: 12,713,634
2010: 12,830,632
2014: 12,880,580
As for Chicago, although the population declined during the 2000s (particularly the black population), it has been growing since 2011, and the earlier decline was offset by population growth in the Chicago suburbs. The high income zip codes in Chicago are certainly not "shit holes", and still command high rents and have all the kinds of culture one expects to see in a big city. The most rapid population loss has been in rural Illinois, a trend that is common throughout most rural areas in the US.
Be sure to stay far away from the scams that claim to teach how to fliip houses. Horror stories abound of people being asked to pay, and do pay, tens of thousands of dollars to supposedly learn how to flip properties. Most such classes are, apparently, completely fraudulent.
People take course in how to buy low and sell high?
Seriously?
Sheese.
Squid
I would have never guessed Mentor, OH was a city where houses are being filpped. I guess all the people cooking up meth there want to throw their profits at residential real estate.
I hate home flippers as much as all the banksters. I understand the basic idea and why. However, it was a major contributor to the last crash, as well. Plus, I do not have to be rational.
There are two types of home flippers.
Type 1, Good. They buy an old home in an up and coming area and refurbish, rennovate or improve it. They add real value and make a nice profit, similar to what you might see on HGTV. These guys are okay.
Type 2, Bad. They spot what seems to be an underpriced home, buy it and put it back on the market at a new price. They have no intention of living in it. They even pyramid homes. IN the last crash they walked away and defaulted like it was someone else's problem. I despise these guys.
I had my eye on a home in a nice area. It listed as sold and then came back on the market in 30 days about 25% higher. Another home I looked at and started to inquire about had the same thing. Only an actual real estate agent bought it and put it on the market at about 70% more. Seemed like a conflict of interest to me.
I told a few agents do not even show or mention a home that has been flipped to me. In fact, if they talk with the seller tell them, "Fuck you.", literally.
One said "But what if it is a home you really love or in an area you want?". I asked if they enjoyed 2008. It was like showing a cross to a vampire.
Frankly, I think I may just sit it out and keep up my commute. I do not want to be the guy who buys in 2008 or even 07.
No, flipping didn't contribute anything to the crash. IT WAS THE BANKS WHO KEPT LENDING MONEY TO PEOPLE WHO COULD NOT AFFORD A PAIR OF PANTS MUCH LESS A 150k home that bubbled up to 400k. If you work part time at McDonalds, you can't afford a 3000.00 a month mortgage payment. It's that simple. Focus on the root causes. Look at who was BUYING THE MORTGAGES.
Sorry for yelling.
I know very well the causes. We covered them in detail in my economics group. You could argue home-flippers are a symptom as much as a cause and I will meet you half way on that.
However, I still hate them. However, I would not go after them as any sort of solution to the underlying problem.
Yell, if you are feelin' it. Probaly therapeutic.
Frip, frip.
Frip.