Fix and flip investing in real estate continues to pay big profits. In addition to being driven by high investment returns, this approach continues to see increases in activity. Furthermore, this market continues to be dominated by small investors. Small flippers – defined as those who closed only one flip transaction in the last quarter – accounted for 69% of flip transactions in the first quarter of 2017.
Defining the Top Real Estate Markets
A fix and flip transaction can be identified by the short time frame between the purchase and the sale. Minimizing the time it takes to flip a property not only reduces interest expenses but also enables the investor to complete more transactions in a given year. Public records that will identify top real estate markets will show a significant percentage of purchases and sales in the same 12 month period yield meaningful information about the effectiveness of this investment strategy.
Of course, public records only provide the purchase price and the sale price, leaving out the amount spent by the investor to get the house ready for returning to the market. However, dividing the difference between the sale and the purchase prices by the purchase price gives a sense of the profitability of each transaction. Based on this methodology, Pittsburgh, Pennsylvania was the place to fix and flip a single family residence. Transactions there averaged a return of 146.6 % in the second quarter of 2017.
Pennsylvania Shows Strong Fix And Flip Activity
Pennsylvania was a strong leader in the market overall, too. Philadelphia and Harrisburg also recorded triple digit returns of 114% and 103% respectively. Even giving a generous allotment for remodeling costs suggests these locations produced a remarkable profit for real estate investors. Interestingly, none of these areas saw a significant increase in fix and flips as a percentage of total real estate transactions. That may change as homes currently owned by flippers come back on the market.
This is a potential development in any market, but the flip times in these communities makes this more likely. The average flip times were 184, 190 and 194 days for Pittsburgh, Philadelphia and Harrisburg respectively, falling into the small flipper average of 194 days. This suggests that the market in these communities is dominated by small, perhaps local, flippers. That, in turn, leads to the possibility that more opportunities can still be found in these markets.
Other Top Fix And Flip Locations
The same dynamic may be taking place in Baton Rouge, Louisiana with an average return of 120.3% and Cleveland, Ohio at 101.8%. The average flip times for these markets was and 172 days and 184 days respectively. Neither market has yet seen a significant increase in the percent of sales that meet the definition of flips.
Those markets that did see an increase in the percentage of flips still showed solid investment returns. Baton Rouge, Louisiana was up 72%, but still returned 120.3% with an average flip time of 172 days. Rochester, New York was up 39% with a return of 72.4% with an average flip time of 183 days. All these returns suggest that there is still plenty of money to be made by fixing and flipping residential real estate.