Home Flipping Hits 14-Year High
While the real estate market in general is adapting to new challenges and market conditions, one segment of the market is going strong. Home flipping is boasting its best numbers in 14 years.
The newly released first-quarter 2020 U.S. Home Flipping Report from ATTOM Data Solutions shows that "53,705 single-family homes and condominiums in the United States were flipped in the first quarter. That number represented 7.5 percent of all home sales in the nation during the quarter, up from 6.3 percent in the fourth quarter of 2019 and from 7.3 percent in the first quarter of last year." Those are the highest numbers since the second quarter of 2006.
The gross profit for home flips across the country also rose over the same time period, to $62,300. "That was up slightly from $62,000 in the fourth quarter of 2019 and from $60,675 in the first quarter of last year," the report said. While Minnesota isn't top of the list for profits, the good news is, we are not on the lowest profit margin list either!
If you're looking to get in on the flipping trend, here are a few insights:
You don't need to buy a million-dollar fixer. "Homes flipped in the first quarter of 2020 were sold for a median price of $232,000."
Profits will be larger where the home prices are higher. "The highest first-quarter 2020 profits, measured in dollars, were concentrated in the West and Northeast. Among metro areas with enough data to analyze, 13 of the top 15 were in the those regions, led by San Francisco, CA (gross profit of $171,000); San Jose, CA ($165,000); Los Angeles, CA ($145,000); New York, NY ($141,899) and Honolulu, HI ($140,190)."
The lowest profits were generally in southern metro areas, such as "Springfield, MO ($20,203); Daphne, AL ($20,650); Raleigh, NC ($21,250) and Durham, NC ($25,000)."
Don't think you have to turn the home around and sell it in 30 days. "The average time to flip nationwide is 174 days."
You don't need to pay cash upfront for the home, as the percentage of flipped homes purchased with financing in the first quarter of 2020 was 40.5 percent, but you shouldn't assume you can finance your flip either. This is something you need to strategist with your bank prior to search for your first project. You will need to understand the financing and holding cost to calculate into your budget.
How Do You Get In On The "Fix and Flip" Market?
So you found financing, a property and made it through closing! Congrats!
What's next?
- Order a dumpster for the next ten days and get your demolition man to throw out everything including the kitchen sink. In other words, clear the decks.
- After the house is cleared of debris, it’s time to patch and paint. Let your painters blast the place with their airless paint-spraying arsenal inside and out. Within three days, you’ll have added a huge improvement to your investment. This is the biggest dollar-for-dollar return you can make. Make sure that quality paint is used. “When it comes to painting,” Dan Auito, author of “Complete Home Rehab in 10 Days,” says, “it’s the labor that kills you, not the material. If possible, insist on Sherwin Williams Super Paint. It is a miracle-type formula that covers up bullet holes without any patching compound and it lasts forever. It’s worth every penny; insist on it.”
- After the painters leave, the flooring guys can lay tile and carpet, which will take two to three days.
- Next bring in the cabinet installers and handyman plumber.
- Last comes light fixtures, vanities, toilets, sinks, doors, switch plates and outlet covers.
To get the best sale price for your property, make sure that you and you agent are careful about timing an strategy to sell. After putting your hard earned money and possibly some sweat equity into this project, you don't want to just stick a sign in the yard and hope it sells!
Check out the CallSarahFirst.com/Sell website to learn more about selling.