Home-Flipping Profits Just Hit An All Time High: These 10 States Offer The Highest Return Potential

Tyler Durden's picture

That most distinct remnant of the 2006 housing bubble - home flipping - is not only back, it is more profitable than ever.

According to a new report by ATTOM Data Solutions and RealtyTrac,193,009 single family homes and condos were flipped — defined as sold in an arms-length transfer for the second time within a 12-month period — in 2016, up 3.1% from 2015 to the highest level since 2006, when 276,067 single family homes and condos were flipped.

Home flips in 2016 accounted for 5.7% of all single family home and condos sales during the year, up from 5.5 percent in 2015 to a three-year high but still well below the peak in 2005, when 338,207 single family homes and condos were flipped representing 8.2% of all sales.

The report also shows that 126,256 entities — including both individuals and institutions — flipped homes in 2016, up less than 1 percent from 2015 to the highest number since 2007, when 143,266 entities flipped properties.

Meanwhile, the share of flipped homes that were purchased by the flipper with financing increased to an eight-year high of 31.5% in 2016 while the median age of homes flipped increased to 37 years — a new high going back to 2000, as far back as data is available — and the median square footage of homes flipped decreased to 1422 — a new record low going back to 2000.

"Home flipping was hot in 2016, fueled by low inventory of homes in sellable or rentable condition along with a flood of capital — both foreign and domestic — searching for the returns and stability available with U.S. real estate,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “The combination of more home flips and a greater share of financing for flip purchases resulted in a 19 percent jump in the estimated dollar volume of financing for home flip purchases, up to $12.2 billion for the flips completed in 2016 — a nine-year high.”

“Investors in search of flipping returns are increasingly willing to move to secondary and tertiary housing markets and neighborhoods with older, smaller properties that are available at a deeper discount,” Blomquist continued. “Given that many of these markets are more affordable, we are also seeing a higher share of the flipped homes sold to FHA buyers, with that share reaching a four-year high of 19.6 percent in 2016.”

Perhaps what is most interesting in the 2016 data, is that homes flipped last year, sold for a median price of $189,900, a gross flipping profit of $62,624 above the median purchase price of $127,276 and representing a gross flipping return on investment (ROI) of 49.2%.  Both the gross flipping dollar amount and ROI were the highest going back to 2000, the earliest home flipping data is available for this report.

Among 117 metropolitan statistical areas with at least 250 home flips in 2016, there were 11 with an average gross flipping profit of $100,000 or more in 2016: San Jose, California ($145,750); Boston, Massachusetts ($140,000); San Francisco, California ($140,000); New York, New York ($127,250); Los Angeles, California ($127,000); San Diego, California ($111,000); Oxnard-Thousand Oaks-Ventura, California ($105,000); Seattle, Washington ($102,000); Vallejo-Fairfield, California ($101,000); Baltimore, Maryland ($100,500); and Washington, D.C. ($100,000).

“Our strong wage growth is still supporting rising home prices, which when combined with the historically low number of homes for sale in Seattle, gives home flippers substantial returns on their investments,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. “I believe flipping serves as a negative for any housing market because it further erodes housing affordability, but if there’s a demand for it in the market, it’s a trend we will continue to see.”

Highest gross flipping returns in Pennsylvania, Ohio and Louisiana metros

Among the 117 metro areas analyzed in the report, those with the highest gross flipping ROI were East Stroudsburg, Pennsylvania (241.5 percent); Pittsburgh, Pennsylvania (130.0 percent); Cleveland, Ohio (116.2 percent); Philadelphia, Pennsylvania (107.1 percent); Toledo, Ohio (102.0 percent); and New Orleans, Louisiana (101.2 percent).

Along with Pittsburgh, Cleveland, Philadelphia and New Orleans, other metro areas with a population of at least 1 million and a gross flipping ROI in 2016 of 75 percent or higher were Baltimore (96.6 percent); Cincinnati (87.2 percent); Buffalo (85.8 percent); Rochester (76.2 percent); Oklahoma City (76.1 percent); Chicago (75.9 percent); Jacksonville, Florida (75.8 percent); Memphis, Tennessee (75.6 percent); and Grand Rapids, Michigan (75.0 percent).

Highest home flipping rates in Tennessee, California and Florida metros

Among 117 metropolitan statistical areas with at least 250 home flips in 2016, those with the highest home flipping rate as a percentage of all home sales were Memphis, Tennessee (11.7 percent); Clarksville, Tennessee (10.1 percent); Visalia-Porterville, California (10.1 percent); Tampa-St. Petersburg, Florida (9.9 percent); and Deltona-Daytona Beach-Ormond Beach, Florida (9.9 percent).

Along with Memphis and Tampa-St. Petersburg, other metro areas with a population of at least 1 million and a 2016 home flipping rate of at least 7 percent were Las Vegas (9.2 percent); Miami (8.8 percent); Orlando (8.3 percent); Phoenix (8.0 percent); New Orleans (7.9 percent); Jacksonville, Florida (7.7 percent); Virginia Beach (7.6 percent); Baltimore (7.4 percent); Birmingham (7.4 percent); St. Louis (7.1 percent); and Nashville (7.1 percent).

Biggest increase in home flipping rates in Pennsylvania, Nebraska, and New York metros

Among 117 metropolitan statistical areas with at least 250 home flips in 2016, those with the biggest year-over-year increase in the home flipping rate were Reading, Pennsylvania (38.8 percent); Lincoln, Nebraska (38.6 percent); East Stroudsburg, Pennsylvania (36.6 percent); Rochester, New York (31.8 percent); and Allentown, Pennsylvania (29.3 percent).

Along with Rochester, other metro areas with a population of at least 1 million and an annual increasing in home flipping rate of at least 10 percent were New Orleans (up 26.5 percent); San Antonio (up 25.2 percent); Dallas (up 20.9 percent); Boston (up 16.4 percent); New York (up 16.0 percent); Columbus, Ohio (up 14.6 percent); Oklahoma City (up 13.8 percent); Philadelphia (up 11.6 percent); Cincinnati (up 11.5 percent); Grand Rapids, Michigan (up 11.3 percent); Charlotte (up 10.5 percent); Kansas City (up 10.4 percent); and Cleveland (up 10.2 percent).

39 zip codes where at least one in five home sales was a flip in 2016

Among 5,625 U.S. zip codes with at least 10 homes flipped in 2016, there were 39 zip codes where at least 20 percent of all home sales during the year were home flips, including zip codes in Texas, Tennessee, Florida, California, Ohio, Virginia, Pennsylvania, Missouri, Washington, the District of Columbia, Maryland, New York and New Jersey.

In the Los Angeles metro area, which accounted for six of the 39 zip codes with a home flipping rate of at least 20 percent in 2016, the best opportunity for flipping is in lower-priced neighborhoods with properties that need significant repairs, according to Brett Chotkevys, co-founder of Helpful Home Solution, which flips properties in Los Angeles and other parts of Southern California.

We do pretty much a full gut on the houses we buy. Most of those we buy are pretty nasty … they’re falling down, there are druggies living there,” said Chotkevys, noting that a typical rehab for his LosAngeles flips will run $40,000 to $50,000, and it’s not “inconceivable” for him to spend six figures on a Los Angeles fix-and-flip. “We like south central (Los Angeles) a little bit more. The barrier to entry is lower. We can pick up properties in the 200s. … There are normal people not making gobs of money that can afford to buy these houses.

With us being where we are in the cycle, and us being very near the top, we’re not buying any big properties, anything close to a million, and trying to flip those,” Chotkevys added.

* * *

Finally, for those who may be looking to get in the game, even at this late stage, the following infographic lays out the 10 states that have the highest "flipping" gross return on investment. 

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youarelost's picture

Houses in S.E PA are not selling they are being rented. 250 K - 325 K range no one is buying.

evoila's picture

crowdfunding 80-90% loan to COST is going to ensure this trend continues. until it doesn't. and then it's implosion time. thanks obama. 

oncefired's picture

In The Town Of King of Prussia - A "For Sale" Signed banged in on Monday will be Sold by the Following Monday after a weekend open house! KofP may be an aberration because Real Estate tax rates are extremely low because of the Shopping Malls (with renovations, may have taken back biggest in the Country honors), Casino and Businesses are paying the Majority of taxes, The School District is actually only half the size of Normal School district, so School Taxes which really are the vast amount of RE Taxes are low because of this. The Supervisors have figured with the recent boom in Renting - that they should start a program where they let developers go into Industrial parks and knock down certain buildings and put up big Apartment Complexes - Theory being is they get new net taxes on the new building which will Appraise well for tax purposes and they lower the Available signs making the Business area look more desirable. I own Property in this town and Property in 2 adjoining towns - A year ago I could sell any including a large commercial building. I know have 6 properties under contract, have people calling me about a rental that isn't on the market (because the Housing Authority has one of their best and brightest in there selling drugs, paying me 25% more then I could get on the open market, they have it under Lease for 3-4 more months - this particular house got caught up in Obutthead's program to move Section 8 people to better neighborhoods even though it would cost taxpayers dearly! - did I mention they Get free Rent, Free heat, Welfare, Food Stamps, Medicaid and from what I am told a pretty lucrative drug business on the side!). I already own a couple Houses down in SW Florida that are waiting for me to move to - one More kid 1-2 years until graduation then the Primary goes and i am out of here! The two house I have in SW Fl are bringing in $3k a week, so I have no problem waiting to get the young one off to college - I'll have the cash I laid out for them repaid before I even move (Also bought these house at 40% their pre 2008 value). Just Need Grandma Yellen to keep This Ponzi going for a Bit Longer! Then I will Semi-retire - slap a Boat out at my dock on the lift and go out every day a do some "Drifting & Dreaming!

oncefired's picture

My Biggest problem is I have to mount an expedition in PA to recover PM's lost in a boating accident, so I can transfer it South to lose in another boating accident!

runnymede's picture

Maybe I can flip that $100 mall in Pittsburgh

hope_talk's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

MagicalUnicornFarts's picture

KOP is exploding with new retail and housing. Good for you getting something back from the bloated PA Govt! Those fuckers have been leaching on the taxpayers for far too long! 

 

I was talking to my local rep and point blank told her "If Texas only needs to have its govt every other year, why does PA need it every year". Her answer was that Texas gets more revenue from gas and oil...as she sat on her fat ass doing nothing except finding other ways of screwing her constituents. 

 

 

Dilluminati's picture

Carroll Valley PA Single Family Homes

I'd say we are stable here in this market, the question becomes if you sell, where would you move, and would you renovate?

 

I'm considering moving.

Houses Depreciate's picture

Housing  demand at 20 year lows is stable? 

runnymede's picture

We're all renters when you think about it. Property taxes encumbering in perpetuity under threat of confiscation by violence if necessary. 

The State is organized crime and those that run it are a professional criminal class protected by law. There is no such thing as inalienable rights if the State or anyone else can suspend them for any reason. It's the original lie of the constitution. Great in theory, a lie in practice. You have no economic freedom. All institutions by their legal design are self-interested and self-preserving. As are the people that run them.  "....of, by, and for the people...." is the greatest successful stroke of propaganda in US history.

If you understand these principles you know more than 95% of the humans that have ever fogged a mirror. 

Excellent reads: Our Enemy the State by Albert J. Nock

Road to Serfdom by F.A. Hayek

Friedrich not Salma's picture

"Late in the game" is indicated when foreclosures tick up. So far that doesn't seem to be happening. When it does, cut your price fast and take the first offer.

Edit. I learned the above in 2003 from a book i bought on amzn.

www.realestatetiming.com/book.html

What Campbell wrote back then, I saw come true as the bubble broke years later.

NoDebt's picture

I live in the Philly area (not to be confused with living IN Philadelphia).  The amount of money you have to pour into a lower-priced "unique fixer-upper" offsets most of that gargantuan 108% ROI.  There are a kazillion fucked up homes in the area that can be fixed up and sold.  HOW MUCH IT COSTS TO DO THAT is what's in question.

NOTE THAT THE ROI LISTED IN THE GRAPHIC IS IN GROSS PROFIT.  A "flipper" only makes money on NET profit.

 

Delving Eye's picture

"fucked up home"  That sounds like mine.

Bay of Pigs's picture

Higher rates should improve the situation.

s/

MagicalUnicornFarts's picture

Philly proper is a shithole. Even if you buy a nice home, the roads are so horrible your vehicle won't last a few years. 

ebworthen's picture

FED induced inflation, backed by bailed out Fannie/Freddie, Tax Payers to pay the bill, Banksters and the Casino ringing the cash register.

Cha-Ching!

Pigeon's picture

Yes, all that "strong wage growth" is supporting these prices.... Not ridiculously low rates, and sub prime buyers promoted by sleazy FHA policies.

sheikurbootie's picture

Not everyone is making money "flipping".  I can introduce you to plenty that have lost a lot or everything.  It's not uncommon to run into a money pit while flipping.  All it takes is one bad one to wipe out the little guy.

Xena fobe's picture

What idiot buys a flipper house?  Better to rent if there's no inventory.  Flipping should be illegal to begin with.  F'ing parasites.

Joke Heros's picture

Almost every house I've seen sold in this area (southern CA) get's immediately flipped and then sold to some sucker who is buying a giant shiny piece of shit. One house gets sold twice in a matter of months and it skews the home sales stats (two "buys" for 1 "move in")

Also, I've noticed prices are slowly nudging up to the '04 pre-bubble shit storm days.

Delving Eye's picture

Prices are moving up here in southeastern CT, too. But so are foreclosures. Wonder which one is gonna win that race?

American Snipper's picture

People buying dumps & making them livable is a respectable profession that helps neighborhoods by cleaning it up & fix up homes the prior owner could not do.

You must be a no growther commie that hates capitalism while tweeting at star bucks your hatred for Trump on your iPhone, sipping a skinny decaf soy latte.

stacking12321's picture

exactly!

xena fobe is one of the "there oughtta be a law" crowd who doesn't like to see other people succeed through hard work.

runnymede's picture

True all that. Assuming true market forces are at play. 

Those avatar snippers may come in handy for the haircut the bag-holding marginal buyer may take when fake money loans are less than readily available. Which will happen the minute values drop. Memories are short for most folks. Credit markets froze up almost overnight in 2008.  I know---- I was on the front lines. 2008 is still reverberating, even though it may appear in abeyance on the surface. Unless the increasing home values are driven by wages or remodel, its a ponzi. In super heated areas, many homes, and especially condos, are sold to other flippers.

Zirp and fiat money will be the future historians' (or archaeologists) defining characteristics of our collapse. We are living our own cautionary tale. 

Fiat distorts everything it touches. 

 

Dilluminati's picture

I watched prices on condos or units drop by 33% and 40% in a 4 month period in Ocean City MD.  Identical units in a condo, exact same floorplan where a "comp" would sell out fast, lowering the price of the other units, and then move outs, less than required owner occupancy rates, then people stop paying regime, and bankruptcy.   

It's a wonderful ponzi to get in on early.. 

714 Mooring Rd # C105,Ocean City, MD 21842

If that sells at an offer the comp next door takes a loss huh?


Iconoclast's picture

I applaud your ideology, but why not just step out of the way and allow owner occupiers to build in their own sweat equity, who needs middle men, and excitable flippers?

Dilluminati's picture

The reason most of these places look the way they do is because the current owners can't wipe their own asses, flush their own toilets.

It is funny, I have been looking at Zillow and the bargain priced properties are neglected properties and AS IS sales, these people neglected to do mimimal maintenance, minimal house cleaning, etc.

When people buy homes they borrow the ability in some cases to buy better quality, newer quality than what they in fact are accostmed to.

But relying on homeowners to renovate their own homes?   Take a look at the 1/2 done efforts on zillow.   Construction is a trade for allot of reasons: but to name but a few their is licensing, correct tools to acheive a good result and perform the task economically, results of a crafted application of a trade, and finally time which is the missed asset.

A floor tile job done with commercial grade materials by an amateur can detract value from a home because of the costs of ripout.

 

507 Cypress Way,Martinsburg, WV 25401

google that as an example of what people mean by flip

 

The problem with flipping is that defects many of them are painted over when there is significant strutural damage from leaks, etc.

The roof bone is connected to the frame bone, connected to the foundation bone, connected to the window bones, minus the insulation.

What happens is that a sale is performed where the bank ends up having more equity in the home along with the buyer.

Somebody rehab'd a home within a block of me where I live in PA, the well was bad, there was roof issues, genuine structural issues, and they came in and laid sod in the fall which is now dead, was I glad they did yep?

Should they have probably torn that home down?  Yep.  And really it was incredible negligence on the part of a drowning owner that allowed that home to fall apart.

It could be health, divorce, loss of a job, etc.. allot of reasons why that home slid like it did in a good neighborhood, drugs, mental health, rotten tenants

But some of those homes really need to just be dozed

Houses Depreciate's picture

That's the end result of paying a grossly inflated price for what is always a rapidly depreciating asset.

tion's picture

In some of these neighborhoods the houses are selling for under $50k and people cannot get loans on them, because the banks dont consider it worth their time. They must be bought with cash. You can find habitable (havent had plumbing/electrical/furnace stolen and roof is solid) houses for under $15k. But would be owner occupants dont bother to save up money to buy with cash. If they can ride out the first year they could get a heloc to help finance renovations, but almost no one is doing this in these neighborhoods.  IMO these 90% ROI number are coming from the 7k-20k properties that need 7k-20k parts+ labor and sell for 55k. Not glamorous. But these guys are providing an important service, bringing low cost housing back 'online'. The killer deals are harder to come by in the 130k+ neighborhoods. Not that 50% ROI is shabby, but not everyone has that kind of cash to throw around.

Houses Depreciate's picture

Paying grossly inflated prices for rapidly depreciating assets is a sure path to bankruptcy.

innertrader's picture

The house I had built in 1980 for $225,000k is now worth $1,750,000+; which has partly defined and kept up with basic inflation.  Therefore, I'd have to question your statement, from my view.

Houses Depreciate's picture

And not a buyer in site at a fraction of that amount.

And you didn't "build" anything. 

Blankenstein's picture

"Now worth" is meaningless unless underlying fundamental (salaries) can support those prices.  It has nothing to do with "basic inflation", it has everything to do with the Federal Reserve's interventionalist policies and the lowering of lending standards.   

Blankenstein's picture

The buyers of these flipped homes with inflated prices get FHA, Fannie and Freddie loans that are backed by the government aka taxpayers.  These loans provide for loans with as little as 3.5% down and up to 7xs income to house price.  This puts people in mortgages/ homes they really cant afford and puts the taxpayers on the hook when bubble 2.0 pops.  

Government propping up the housing market is not capitalsim.  

rent slave's picture

Perhaps he's someone who just want rent to be deductible.I could have bought a mansion from the savings if it were such over the past 49 years.

PT's picture

Flipping would not be so much of a problem if there was not such easy access to Ponzi Finance.

And for those who call Flipping a just reward for "hard work", that all depends.  For a long time now the bulk of the profits came from old-fashioned Capital Gains plus new-fangled dodgy finance schemes.  It takes all kinds to build a society.  They can't all be house-flippers.  (errr, that contradicts the idea that you should go where the profits are, so we got that to take into consideration too.)

What's the difference between a legit business and a pyramid scheme?  If there is no end-user and everyone is only on board in order to sell to someone else then I say you have a pyramid scheme.

Now we just gotta check the numbers.  Do those numbers work for an end-user?

William Dorritt's picture

The name of the Game in flipping is getting them cheap.

Unethical Nursing Home Operators are the best source

rockstone's picture

The key to playing with explosives is to know when to back far, far away before they explode.

PT's picture

Helps if you're the only one with the lighter and the fuse.

1.21 jigawatts's picture

This can only go on forever, forever, (((forever)))...

runnymede's picture

All fueled by the devil's own currency ----- fiat

Anything based on unsound principles is bound to fail.

My God, what predators we have become. Man is the only animal that systematically preys on its own species. 

Nature may tire of us sooner than we think. 

August 15, 1971 the day epic collapse was baked into the cake. And epic it will be.

Iconoclast's picture

Staggering to witness that less than a decade later this shitfest had returned. People en masse have less memory storage than a goldfish.

Houses Depreciate's picture

Staggering housing losses just keep ramping up.

 

Bonita Springs, FL Housing Prices Crater 8% YoY

https://www.zillow.com/bonita-springs-fl/home-values/

innertrader's picture

What is any industries "net" profit compared to "gross" profit???  I don't think "stocks" are priced based on "gross"..... at least not in MOST industries!

pound the vix's picture

How can they call this "Profit"  There are the cost to rehab, cost of purchase, cost of sale none of which is mentioned.  If you purchase a house for $100,000 and put $50,000 into it and sell it for $150,000 this article calls it a $50,000 profit (50%) but it is actually no gain

T-NUTZ's picture

True, very misleading by the authors.   The cost of purchase PLUS capital improvements should be added before you calculate a gross return.   Then you can take out all of the Taxes insurance and maintainence to get a net.   Flippers in the main are very good for the economy and improving the housing stock.   Further for all the effort and risk they actually make probably closer to 10% ROI.

Houses Depreciate's picture

At current prices, the ROI is negative. And keep in mind rental rates are falling.

adr's picture

You want to go to East Cleveland and flip a house, go ahead,  might not make it out alive. 

Oh,  I forgot. All of those homes are bought and sold to Blackwater for Section 8 transfers. I doubt there is a single person that actually pays for housing in East Cleveland. Maybe the lone 90 year old white lady that refused to move. 

The majority of these transfers are for government welfare payments to large institutional investors.