TRY NOT TO FLIP OUT
Thinking of plunging into the “fix and flip” craze?
Maybe you’ve been binge-watching home-remodeling shows on cable that boil the process down to a nice 27-minute segment; or perhaps you’ve come across one of those (self-proclaimed) “gurus” who profess how easy it is to flip houses “in no time at all,” while flaunting their profits.
Well, before you part with a large chunk of your savings, you might want to take a hard look at local stats -- as you may be biting off more than you can chew.
A study conducted by WalletHub -- the “personal finance social network” -- analyzed 172 large cities across the U.S. (with at least two large cities in each state) to determine the best and worst places to flip a house for short-term investment purposes.
The study considered a number of criteria, including median values, market potential, construction and labor costs, real-estate taxes, crime, school districts, among others. And while the report concluded that the average gross profit for a house flip in Q1 of 2021 was $63,500, the city in which it was attempted turned out to be the “make or break” factor.
After an examination of the best- and worst-ranked cities, one need not be an economist to conclude that larger, more densely populated areas pose greater hurdles to a profitable flip. Higher than normal purchase prices and strong competition keep margins razor thin, especially for the novice rehabber. However, over in South Dakota, Idaho, and Montana, you’ll find the process a bit easier. With low renovation costs and a high “quality of life” score (the subjectivity of which we will ignore) Sioux Falls (South Dakota) edged out as the number one place to be a flipper. On the other end of the spectrum, with the highest acquisition, renovation, and remodeling costs, Newark (New Jersey) ranked dead last.
Other notable cities included Pittsburgh (PA), with the highest return on investment; Montgomery (Alabama), with the lowest median purchase price; and Little Rock (Arkansas), with the lowest average remodeling costs.
Pandemic related shortages and skyrocketing construction-material costs may skew results a bit, but the “first rule of real estate” continues to withstand the test of time. The game is still all about location ... location ... location!
Here are the top 10 best and worst house-flipping U.S. cities:
1. Sioux Falls, SD
2. Missoula, MT
3. Peoria, AZ
4. Nampa, ID
5. Tampa, FL
6. Mobile, AL
7. Boise, ID
8. Rapid City, SD
9. Gilbert, AZ
10. Knoxville, TN
* * *163. Oxnard, CA
164. Wilmington, DE
165. Jersey City, NJ
166. New York, NY
167. Los Angeles, CA
168. Bridgeport, CT
169. San Francisco, CA
170. Yonkers, NY
171. Oakland, CA
172. Newark, NJ
Source: https://wallethub.com/edu/best-cities-to-flip-houses/23158