Even though flipped homes make up for only 5.5 percent of home sales in the country as opposed to 8.2 ten years ago, it is still a popular practice and there are still housing markets where it makes financial sense to flip homes.
Before we get to the data first unearthed by RealtyTrac and then collated by 24/7 Wall St., we should probably say a thing or two about home flipping. For those of you who are not familiar with the concept, home flipping entails purchasing a property, renovating it and then selling it, all this in a relatively short time span. In order to make a profit flipping homes, the price at which the property is sold has to be higher than the combined price at which it was purchased and the costs of renovating the property.
Home flipping has been a popular practice for quite some time now and even though it was hurt by the housing crisis as much as any other market, it has been recovering steadily. It is still (and always has been) a very risky and costly practice, but the good news is that some housing markets are very welcoming of home flippers who can make significant profits doing it.
RealtyTrac, a housing market tracking company has been keeping their tabs on various markets in the United States and the 24/7 Wall St. website looked at their data, finding 25 housing markets where home flipping is most lucrative.
In order to determine the 25 most lucrative home flipping markets, 24/7 Wall St. looked at the return on investments which is based on pre and post-flip average price for homes that have been bought and sold within a 12 month period. It should be pointed out that this is gross profit, meaning that costs of repairs and maintenance have not been included. Their statistics also include the number of flips done over the 12-month period, as well as the percentage these homes play in the overall market and the average price for the flipped property.
According to 24/7 Wall St., the best home flipping market in the United States is Pittsburgh, Pennsylvania where people more than double their investment. More precisely, the average ROI is 129.5 percent. One of the reasons for this is that the median purchase price of property in Pittsburgh is below the national median and one of the lowest when U.S. metro areas are concerned.
The New Orleans-Metairie metro area in Louisiana is the second most lucrative home flipping market where flippers almost double their investment, with ROI averaging 99.2 percent. New Orleans is among the very few lucrative home flipping markets where the home prices have been on the steady rise for the last 10 years. According to people from RealtyTrac, the most lucrative home flipping markets are usually those where home prices are dropping and the Big Easy is obviously an exception.
The third most lucrative home flipping metro area is the four-state Philadelphia-Camden-Wilmington area where the return on investment is 98.4 percent and where flips make up for 5.7 perecnt of the entire housing market. According to Daren Blomquist from RealtyTrac, one of the reasons why this particular metro area is that good to home flippers are well-off buyers from New York City who are taking advantage of the low house prices in Philly.
Cincinnati, Ohio is the fourth most lucrative home flipping market with the average ROI of 89.7 percent and in the fifth spot, we find the New Haven-Milford metro area in Connecticut with the ROI of 89.7 percent. In Connecticut, it is once again the New York City buyers who are making the market that profitable.
The following metro areas fill the next 20 spots on the 24/7 Wall St. list:
- Baltimore-Columbia-Towson, MD
- York-Hanover, PA
- Knoxville, TN
- Allentown-Bethlehem-Easton, PA-NJ
- Jacksonville, FL
- Milwaukee-Waukesha-West Allis, WI
- Hartford-West Hartford-East Hartford, CT
- Chicago-Naperville-Elgin, IL-IN-WI
- Harrisburg-Carlisle, PA
- Memphis, TN-MS-AR
- Cleveland-Elyria, OH
- Lancaster, PA
- Clarksville, TN-KY
- Toledo, OH
- Augusta-Richmond County, GA-SC
- Pensacola-Ferry Pass-Brent, FL
- Chattanooga, TN-GA
- Oklahoma City, OK
- Columbia, SC
- Palm Bay-Melbourne-Titusville, FL