South Dakota Flipping: Top 5 worst State, Number 1 City

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South Dakota Flipping: Top 5 worst State, Number 1 City

Eric R. Dehner
Rental Property Investor · San Diego, CA · Member since 2017 · 31 posts · 16 votes

Hi guys,

Did anyone see this recent post by the folks at BiggerPockets?  I've been thinking of investing back in my home state of South Dakota (originally from Vermillion) for quite some time.  At first glance I thought how could my home state be one of the top 5 worst states for flippers but have 2 of the top 5 best cities?  It didn't take much time for me to come to the conclusion that the vast majority of the state would be very tough to flip in. Think of the demand for a well constructed flip in small towns across the state.. minimal at best.  What has been impressive is the growth in cities like Sioux Falls and Rapid City even during my lifetime.  Any flippers out there from Rapid City or Sioux Falls who are enjoying the fruits of their flipping labor?  

What about the worst states for house flipping? CNBC’s rankings included these states:

Hawaii

Wyoming

South Dakota

Montana

Mississippi

The cities where the survey determined the outlook is highest are:

Sioux Falls, South Dakota

Missoula, Montana

Rapid City, South Dakota

Billings, Montana

Peoria, Arizona

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    • Curt DavisBusiness Member
      Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
      6y

      I am originally from Sioux Falls !!!!! Go Tanagers/Coyotes!!!!! Also, D Days were a blast !! 

      Curt Davis - KAIZEN Realty538 Reviews
      WebsiteView Page
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    • Joe SplitrockPro Member
      Moderator
      Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
      6y

      @Eric R. Dehner I read that blog post and it was not well thought out. The data source for worst state and best cities were two different sources. The author (who is normally very good) didn't really analyze or explain why the data sources were different. If you dig in, the answer is that they looked at different variables. 

      I would argue no city in the state is great for flipping. Yes there are flippers, but they are working on small margins, because our home values are low here. The main reason home values are low is land availability. You can build new construction within a 15 minute drive of downtown. It is not like California where land values allow you to "over improve" the property. If you buy a house in a neighborhood here where properties are worth $200,000 then your max after rehab value is basically that. 

      The other factor here is low incomes. If you look at houses in the million plus category here, most all of them resell for a loss. Buyers are looking in the $200K to $300K category. There just isn't enough supply of run down houses that are cheap enough to rehab and hit those price points. If someone is paying closer to $300K or above, they want to be in new construction.

      The flippers I know here are hands-on doing much of the work themselves. They really have a construction job as much as a business. Not all of them of course, but that is the common model here.

      No doubt it is a stable market with decent population growth, but high value / high appreciation markets are usually better for flipping. If compared to the stock market, we are more like a bond investment. Steady growth, low risk.

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