If you’ve been thinking of fixing up a home and selling it to make a nice profit, now may be the time to do it. In the first three months of this year, home flippers took in a 30% gross return on their investment, this is one of the highest levels in years, according to data released late April by RealtyTrac ; that’s compared to just 4% in the last quarter of last year. Flippers bought the homes on average of $183,276 and sold them for $238,850,according to the data.
Most flippers have to spend their money to fix up the home before they sell the house for a higher price, but even taking that into consideration, the profits were likely considerable as, on average, the average amount spent on improvements for home flips is only about $4,800, according to BuildZoom.
These returns are very impressive and mainly due, to the housing market being a lot more stable, slower new-home building, and fewer total home flips (flips were down to just 3.7% of all single-family home sales in the first quarter), says Daren Blomquist, vice president of RealtyTrac. And he adds that this is a trend that will likely hold steady in the coming months. “Flippers are behaving rationally this time around as opposed to the last boom when they helped create a price bubble,” he says.
But flippers in some markets do better than others. In Pittsburgh, flippers bought homes for an average of just under $55,000 and sold them for almost double, and in the Philadelphia area they bought homes for about $166,000 and sold them for $258,000. Meanwhile, flippers in Charlotte, Houston, Tampa and Indianapolis tended to lose money on their flips.
Some properties require just a little work to freshen them up and others require multiple building permits. The latter of the two usually gain the biggest profits. Flips that were associated with building permits had a median ROI of 50%, compared to just 13% across all properties, RealtyTrac data revealed. What’s more, BuildZoom data shows that the more an investor spends on the home flip, the higher his return on investment. Yet, Zillow’s real estate expert Brendon DeSimone, author of “Next Generation Real Estate,” says that the heftier flips are usually best left to developers and those who are experienced flippers.
The average cost for improvements on flipped homes was nearly $5,000. Depending on how much work you want to do, those costs could be a lot larger. A major kitchen remodel costs roughly $55,000, bathroom $16,000, and a new roof $19,000, according to Remodeling Magazine. To get a budget for your project, DeSimone says that potential flippers need to total up all the costs for every project they want to do and then add 10% to that.
Flippers should not assume they will make a profit, experts say. “You need to be financially comfortable even if you just break even,” says Julie Davis, a real estate agent at Alain Pinel Realtors. To help ensure that you will make money, DeSimone says that the location of the property is essential (you may want to think about school districts, for example): “Look for a fixer upper in a great location,” he says. And he adds, try to buy a property that is very undervalued. “You make the most on the buy side,” he says. And Davis says that good flippers are “obsessed with numbers” on everything from historical area home prices to interest rates.
Detroit-based real estate broker and investor Ralph R. Roberts tells people to learn everything they can about the industry and don't consider making it a career until they've made double the amount of money in a year that they do in their current job.The average flip took 101 days to complete, up from 79 during the same period last year, RealtyTrac data revealed. And during that period, homeowners will need to dedicate a lot of time to working on the house. “This is not a part-time job,” says DeSimone, who notes that those with 9-to-5 jobs may find it difficult to find the time to oversee and do the work it takes to flip successfully.
If you would like information on your local real estate market, or are first time home buyer not working with a Realtor and would like to schedule a consultation with a qualified Oakland County and Macomb County Realtor, please complete the Lang Premier Properties contact form to have a real estate agent contact you.
Lang Premier Properties are Birmingham Realtors specializing in Oakland County Real Estate. Stephanie is an agent with Max Broock in Birmingham, Michigan. See what past clients have to say about Stephanie Lang. Lang Premier Properties looks out for your best interests when you purchase a new custom luxury home. We always recommend working with an experienced luxury real estate agent when buying a new luxury estate. you would like information on homes for sale, or are first time home buyer not working with a Realtor and would like to schedule a consultation with a qualified Oakland County and Macomb County Realtor, please complete the Lang Premier Properties contact form to have a real estate agent contact you.