Home flipping is a risky but potentially profitable business. An investor buys a home with no intention of living in it. The assumption is that the home will rise in value and can be sold at a profit. When home prices were skyrocketing, the business flourished. The practice remains healthy, and the returns are extraordinary in some markets, even though the increase in home prices is no longer in a frenzy. (You can buy most homes in these 23 cities for under $125,000.)
According to real estate data company ATTOM, 72,542 homes were flipped in the third quarter. That was 7.2% of all homes sold in the period. That was down from 7.9% the previous quarter. The average profit margin on a flipped home last quarter was 29.8%. That was up substantially from a recent low of 22.4% in the final quarter of last year. “The comeback for the home-flipping industry is looking more like a real trend than a temporary break in what had been a pretty bleak couple of years,” Rob Barber, CEO of ATTOM commented about the trend.
In absolute dollars, the median price of a home flipped in the third quarter was $305,000, against an investment of $235,000.
ATTOM measures home prices in 183 metro areas. Among those, margins rose to 93 in the third quarter compared to the previous one.
America’s Best Home Flipping Markets
The best home flipping market in the United States in the third quarter was Akron, Ohio, with a margin of 114.1%. Akron is among the poor, ravaged industrial cities of America’s Midwest. The other best-performing markets were as well. The comparable number in Flint, Mich., was 113.8%. The figure in York, Pa., was 107.5%, while in Canton, Ohio, was 69.6%. Each of these cities has high poverty rates and low median household incomes.ATTOM does not explain why profit margins are higher in poor cities. Based on the fact that the best markets all fall into that category, the trend is likely to continue.
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