Historically, real estate has been one of the most solid investments. Though the recession was one of the worse housing crises in modern history, house flipping has rebounded with a force. Our visual guide to flipping shows you the most tried and true tactics for flipping a house for 30% profit. Check it out today!
EMBED ON YOUR SITE!
House Flipping 101
Real Estate Can be Daunting, But if Done Correctly has a lot to offer
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Historically, real estate has been one of the most solid investments.
[graph of annual increase in home prices relative to inflation]
Date / Inflation Adjusted Average Home Cost in 2000 Dollars[3]
1940: $30,600
1950: $44,600
1960: $58,600
1970: $65,600
1980: $93,400
1990: $101,100
2000: $119,600
“Buy land, they aren’t making anymore of it.”” – Mark Twain
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And though the recession was the worst housing crisis in the US’ history
Housing equity wealth has doubled in the last five years
[stats below in sort of a dashboard]
Home Equity at height of housing crash: $6 trillion
Home Equity in mid-2017: $13.9 trillion [1]
Increase in value per home owner 2016: $11,000
Increase in average home value per month 2017: .3%+
Increase in average home value 2017: 6.5%+[4]
Houses Appreciated 2x as fast as inflation[2]
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Increase in house value has been driven by a number of factors:
[maybe have illustrations that represent the following three factors. They then each have a corrosponding fact.]
Immigration to Metros
–Supporting Fact: 12% of Americans move every year. With the largest gain in suburbs in metros.[5]
Inventory Shortage
–Supporting Fact: Close to 1 million new households are created each year in America. An average of 500,000 new homes have been created each year for recent years. Net annual housing shortage: 500k units.[6]
Focus on building of non entry-level housing
–Supporting Fact: New households tend to be young and seeking starter homes. In 2015, 75% of new apartment constructions were high-end.[7]
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And while our housing recovery hasn’t hit everywhere equally
[chart about disparities]
Leading the Pack[9]
[city / percentage of homes at or above pre-recession values]
Denver / 98.7%
San Francisco / 98.0%
Oklahoma City / 94.3%
Nashville / 94.1%
Fort Worth / 93.9%
Left Behind[9]
Las Vegas / 0.6%
Tucson / 2.4%
Fresno / 2.5%
Camden / 2.7%
Fort Lauderdale / 2.7%
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House Flipping is a lucrative tactic in most metros
$29,342 = Average profit from flipping a house nationwide[8]
90 days = average goal for max house flip time[8]
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The Basics:
1.) Buy a house for the lowest possible price
2.) Spend what’s needed to rehab the house
3.) Resell the house for its maximum price
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But to really pull out ahead, there are a few other factors to consider
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Factors to consider:
Demand: (contributing factors to demand) population growth, job growth, low vacancy, immediate location
Costs: (contributing factors to costs) Material Costs, Labor Costs, Administrative and Tax Fees, Below-Market Opportunities
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Deep Dive Into Demand:[10][11]
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While there are some standouts for unrelated reasons the following factors relate to demand for flipped housing:
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Largest Post-Recession Population Growth:
[city / percentage growth]
Austin, TX 22.2%
Cape Coral-Fort Myers, FL 18.0%
Raleigh, NC 17.4%
Houston, TX 16.2%
Charleston, SC 16.1%
Orlando, FL 15.6%
San Antonio, TX 15.4%
Dallas, TX 14.9%
Denver, CO 13.7%
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Post Recession Job Growth:
[city / percentage growth]
Austin, TX 31.1%
Cape Coral-Fort Myers, FL 30.1%
Charlotte, NC 29.5%
San Francisco, CA 29.5%
Grand Rapids, MI 28.4%
Raleigh, NC 27.9%
North Port-Sarasota-Bradenton, FL 27.9%
Charleston, SC 27.5%
San Jose, CA 27.5%
Nashville, TN 26.8%
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Percentage Vacancy 2017 Q1-3:
[city /percentage vacant]
Akron, OH / 0.3
Detroit-Warren-Dearborn, MI / 0.4
Seattle-Tacoma-Bellevue, WA / 0.4
Knoxville, TN / 0.4
San Diego-Carlsbad, CA / 0.4
Nashville-Davidson-Murfreesboro-Franklin, TN / 0.6
Boston-Cambridge-Newton, MA / 0.6
San Francisco-Oakland-Hayward, CA / 0.7
Dallas-Ft. Worth-Arlington, TX / 0.7
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Cutting Costs Like a Pro:
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Material Costs: [12]
Typical Range for Remodelling Multiple Rooms: $16,846 – $63,260
Full Range: $3,500 (low end) – $135,000 (high end)
While some renovations will require certain locations to be repaired, choosing the right rooms is key.
[12]
Money Areas:
[Area, average cost of renovation]
Kitchen: $20,474
Bathrooms: $10,000
Appliances: $300-$3,500
HVAC: $3,400
Roof: $6,838
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Cosmetic, non-structural changes often provide the biggest “bang for your buck” in resale value
Front Door: $350
Appliances: $300-$3,500
Painting: $1,714-$3,682
Upgraded Fixtures, Doorknobs, Cosmetic Details: <$1,000
Modest Landscaping: <$1,000
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Labor Costs
Depending on the market and work done, learning to renovate yourself can be a massive cost cutter or not worth your time.
Construction laborer cost:[13]
[state, average hourly rate]
Most Expensive:
Illinois $27.01
Hawaii $27.01
Massachusetts $25.84
New Jersey $24.05
Alaska $23.88
Least Expensive:
Arkansas $12.38
North Carolina $13.50
Alabama $13.74
Mississippi $13.92
Florida $14.00
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Below-Market Opportunities
Bank or City-Ownder Properties are often available for below-market prices.
Rule: buy for 70 cents on the dollar, sell for 80 cents on the dollar
(1) Calculate Your Maximum Allowable Offer (MAO)
Most investors want to close on a house for 70% of its resale value
Example: if the house is worth $200,000 and it needs $20,000 in renovations
MAO = $200,000 x 70% – $20,000 = $120,000
Note: Wholesale fees are often around $10,000 so your first offer should be lower
$100,000 = First Offer
(2) Sell below-market for a quick turn around
Example: $200,000 x 80% = $160,000
Optimum flipping Profit: $60,000
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Citations
[1]https://www.housingwire.com/articles/38418-home-equity-wealth-doubled-in-last-5-years
[2]https://www.cnbc.com/2017/06/23/how-much-housing-prices-have-risen-since-1940.html
[3]https://www.cnbc.com/2017/06/23/how-much-housing-prices-have-risen-since-1940.html
[4]https://www.businessinsider.com/us-home-values-zillow-report-october-2017-11
[5]https://www.census.gov/newsroom/press-releases/2015/cb15-47.html
[6]https://www.urban.org/urban-wire/housing-supply-falls-short-demand-430000-units
[7]https://realestate.usnews.com/real-estate/articles/where-have-all-the-starter-homes-gone
[8]https://homeguides.sfgate.com/average-gross-margin-house-flip-49343.html
[9] https://www.trulia.com/blog/trends/home-value-recovery-2017/
[10]https://info.trulia.com/download/Trulia_HomeValueRecovery_May2017_100Metros.xlsx
[11]https://www.census.gov/housing/hvs/data/rates.html
[12]https://www.homeadvisor.com/cost/additions-and-remodels/remodel-multiple-rooms/
[13]https://www.bls.gov/oes/current/oes472061.htm
[14]https://flippingjunkie.com/wholesaling-bank-owned-reo-houses-no-its-not-impossible/