Top 10 places to flip houses in 2012

Rehabbing & House Flipping
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Top 10 places to flip houses in 2012

David RobertsonBusiness Member
Flipper/Rehabber · Kansas City, MO · Member since 2010 · 755 posts · 778 votes

http://www.usatoday.com/story/money/business/2012/10/09/house-flipping-revival/1622429/

The article states the average flip is around $29,000 in profit, but I did find it strange that in markets that the median houses are only selling for $190-200k, they said the average profit was over $55k+?

I am from the Kansas City area, and I imagine our market is very similar to that of Omaha. The article states that the average flip profit is $79,000? How is this possible when the median house is only $196,000? Thats 40%!

Are other flippers seeing results like these with profits of $55k? Honestly, I am having trouble finding houses with $20,000 in profit off the MLS. Is there typically more profit buying homes not listed on the MLS?

I just found these results to be very surprising, any other thoughts would be appreciated.

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  • Account Closed
    Residential Real Estate Agent · Ocala, FL · Member since 2009 · 255 posts · 65 votes
    13y

    Gross...not net

    They can't know net numbers.

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  • David RobertsonBusiness Member
    OP
    Flipper/Rehabber · Kansas City, MO · Member since 2010 · 755 posts · 778 votes
    13y

    Does gross profit not take into account repair expenses, holding costs, buying/selling costs?

    If so, these figures are pretty much worthless...

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  • Eric M.
    Flipper/Rehabber · Louisville, KY · Member since 2008 · 1k+ posts · 1k+ votes
    13y

    No, it takes into account nothing.

    It is simply looking at the sales prices. You buy at 100K and sell at 150, they report 50K profits. Kind of like the flip tv shows. Not close to reality.

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    13y

    That's an unfortunate and badly done article. The word profit should never have been used. The public information available and analyzed would only give "spreads" on re-sales. And I'm not sure how useful "average" spread is compared to median spread.

    On my last 3 sales (1 rehab and 2 as-is sales), the spreads totaled $80K, but my profits were $47K. J Scott has a blog post today about a recent rehab where the spread is huge but the profit is small because it was a gutted house.

    The numbers in that article are entirely useless.

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  • John Evan Miller
    Foreclosure Specialist · Miami, FL · Member since 2011 · 153 posts · 24 votes
    13y

    Yep, agree with all the comments here. Sounds like a quickly written article by someone who did not do their homework.

    As to rehabbing properties from the MLS, yes your profit margin could be smaller. Since agents are getting paid by commission, the higher the selling price the bigger their paycheck. This is a good motivation for pricing properties high.

    You could look into individuals who are behind on their property taxes or out of state property owners or abandoned properties. Unlisted properties, though more work to find, can yield much better returns.

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  • Mike LaCava
    Real Estate Investor · Buzzards Bay (Bourne), MA · Member since 2012 · 208 posts · 28 votes
    13y

    Those profits are just way too high. It's articles like these that bring on new potential house flippers and then they just get discouraged because they don't realize a $72,000 profit.

    Not sure where they're dreaming up all those numbers, but soft costs, finance costs and holding costs all factor into the equation. Don't forget about real estate commissions as well when you sell.

    Unfortunately it's articles like these in major newspapers that give new house flippers and inflated sense of how much money can be made in this business. Sure, we'd all like to make those kinds of dollars when we flip houses, but if you don't know what you're doing you get into trouble really quickly. And also, by telling only half the story. As far as "profits" are concerned, it sucks in new be real estate investors who feel that this business is "easy".

    Nonetheless, great fodder for discussion on this forum!

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  • Grant P.
    Denver, CO · Member since 2012 · 218 posts · 48 votes
    13y

    Now that the market has turned here in Denver it is not that hard to make 100k plus using the over simplified figures that this article quotes. I target properties around the 350k ARV mark.

    I've been working on listing properties for a local investment group, and in 1 month I have worked on listing and selling 4 properties and while I don't know the eaxact cost of their financing/rennovations as they use tons of private capital, but I know what they are getting in and out for.

    Based on my knowledge of costs of rehabbing in the local market, they made 100k+ on each of the deals, 3 of the properties were listed at 350k, one at 450k. Here you can make a ton of money, just not with a 190k ARV

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  • Mike LaCava
    Real Estate Investor · Buzzards Bay (Bourne), MA · Member since 2012 · 208 posts · 28 votes
    13y

    Yes it is true the higher the sale price the higher the profit or at least it should be because it is all relative. I recently sold a house for a little over $300K and the profit was $80,000. Sold another at $230K and the profit was around $60,000. These were home runs and wish I could tell you they have been all like that but that is not true. I have 2 I just sold in the $175,000 range and made just a little over $20,000K which is more like a single for me. Projected around $35,000 but ran into a higher rehab & a little lower selling price & longer holding period. This is why I use the 70% formula to protect any downside to the projections. I guess every market can be a little different & you just have to due your due diligence ahead of time.

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