As the national housing market continues to rebound, real estate investors are trying their hand at home flipping — buying and selling a house within six months. While in some markets home flippers lost money, in others they earned a decent return on their investment. In 10 markets, home flippers made at least a 48% profit in the first quarter, according to RealtyTrac figures. In Reading, Pennsylvania, they more than doubled their money.

Lower prices may make these housing markets more affordable for investors. Homebuyers in all but one of the 10 metro areas with the highest returns on home flipping were able to buy property for less than the average home price nationwide.

Click here to see the 10 best cities to flip a home

According to Daren Blomquist, vice president at RealtyTrac, home flippers are attracted to less expensive markets. In Pittsburgh, one of the best markets for house flipping, “you can buy five properties to flip and diversify” your investments. For the same amount, “in Los Angeles, you [can buy] one property, and flippers would have to put all their eggs in one basket.”

There are a number of variables that can keep home prices in a market low. The strength of the local economy can play a role, as is evident in Detroit and Palm Coast, Florida, where flipped purchase prices were well below the national average of $183,276 in the first quarter. In these metro areas, the unemployment rates were 8.3% and 9.3% in March, well above the U.S. unemployment rate of 6.8% for March.

Factors such as the location and age of properties can also influence home prices. According to Blomquist, 59% of the homes flipped in the Pittsburg area in the first quarter had been built in the 1930s. In contrast, only 24% of homes that were flipped nationally were built that decade.

Home flipping remains a niche and risky activity that is not for everyone. “Those ROI numbers can turn on you very quickly as the market turns,” Blomquist said. Indeed, returns on flipping homes in these markets changed rapidly between 2013 and 2014. The Philadelphia metro area was one of the nation’s most profitable markets for home flipping this year, while just last year flippers lost money.

Some of these markets have been popular among home flippers for over a year. According to Blomquist, there was a surge in home flipping nationwide since the end of 2012. Among the top 10 markets, flipping has accounted for over 10% of sales in each quarter since Q4 2012 in Omaha, Nebraska and Palm Coast metro areas. In the Reading metro area, the nation’s most profitable, home flips as a percent of all sales was also consistently high.

In a few of the best cities to flip a home, institutions play a major role in the real estate market. Institutional buyers accounted for at least 10% of all purchases in the Memphis, Tenn. and Detroit area in February, more than in all but a handful of metro areas. Many buyers in these areas were also buying property for cash or purchasing homes in foreclosure.

However, in general, institutional investors are not flippers. Instead, they buy and hold properties from home flippers in order to rent, Blomquist explained. Because institutional investors want a property that is in move-in condition, “flippers will flip those homes after rehabbing them.” As a result, a strong presence of institutional investors means a better market for home flippers.

To determine the 10 best cities for home flipping, 24/7 Wall St. reviewed return on investment figures from RealtyTrac. These figures are based on the pre-flip and post-flip average price for homes, where RealtyTrac defines as “any transaction that occurred in the [past] quarter where a previous sale on the same property had occurred within the last six months.” Returns represent gross profit and do not include costs such as repairs and maintenance. RealtyTrac also provided institutional, cash and distressed sales figures as of March, as well as median sales prices and median listing prices as of February. We also reviewed home price data from the Federal Housing Finance Authority (FHFA) and unemployment rates from the Bureau of Labor Statistics (BLS).

These are the 10 best cities to flip a home.

10. Seattle-Tacoma-Bellevue, Wash.
> Return on investment: 48%
> Avg. gross profit: $97,388 (22nd highest)
> Flipped price: $300,454 (23rd highest)
> Number of flips: 317
> Flips, pct. of home sales: 4.2% (37th lowest)

Home flippers most likely found bargains in the Seattle metro area, as 2.6% of homes sold in the area in February 2014 were sold at in a foreclosure auction, among the highest rate in the country. In addition, 6.2% of home owners sold their houses in a short sale in February — selling their homes for less money than what they owed on it — also among the higher rates in the country. Perhaps making the area even more attractive for flippers is the fact that the value of homes in the Seattle metro has gone down in the past five years. The composite value of homes in the area has decreased by 1.2% over the past five years, among the larger decreases in the U.S., according to the FHFA’s Home Price Index.

9. Detroit-Warren-Livonia, Mich.
> Return on investment: 48%
> Avg. gross profit: $32,733 (25th lowest)
> Flipped price: $100,734 (8th lowest)
> Number of flips: 368
> Flips, pct. of home sales: 3.2% (18th lowest)

The Detroit metro area was one of the hardest hit by the housing crisis in 2008. House flippers swooned into the area in the fourth quarter of 2012, raising the percent of home sales due to flipping to 13.6%, well above the nationwide rate of 7.1%. That percentage has since fallen to 3.2% in the first quarter of this year, slightly below the nationwide rate of 3.7%. Home flippers can still find bargains in the area. Short sales accounted for 12% of the homes sold in the Detroit area in February, while lender-owned homes accounted for 23% of home sales. Both percentages were among the highest in the nation. Homes sold in lender-owned and short transactions often sell for less than the outstanding amount of the loan, potentially giving buyers access to attractively priced properties.

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8. Memphis, Tenn., Miss.-Ark.
> Return on investment: 51%
> Avg. gross profit: $35,651 (28th lowest)
> Flipped price: $105,176 (12th lowest)
> Number of flips: 156
> Flips, pct. of home sales: 5.0% (48th lowest)

Home flipping tends to be more profitable in economically distressed areas, which may partly explain its popularity in the Memphis area. The area’s unemployment rate was 8.2% in March 2014, well above the national rate of 6.8%. Unlike most cities where home flipping is lucrative, property values in the Memphis area have increased from a year ago. Prices, however, are still relatively low. Flipped homes were purchased for an initial price of $69,524 on average last quarter, up from slightly more than $60,000 in the same period last year. Despite the increase, the return on investment from flipping rose 11 percentage points, to 51%. Low prices in the region likely made it easier for flippers to pay in cash. More than 50% of sales were paid in cash this past February

7. Allentown-Bethlehem-Easton, Pa.-N.J.
> Return on investment: 55%
> Avg. gross profit: $54,543 (50th lowest)
> Flipped price: $153,705 (30th lowest)
> Number of flips: 53
> Flips, pct. of home sales: 3.6% (25th lowest)

A typical distressed home in the Allentown area was sold at a price 74.3% higher than a year ago as of March, a larger increase than the vast majority of other housing markets. Still, distressed homes were discounted 48.4%, one of the largest such discounts in the nation. Such low discounts may be perceived as opportunities for flippers. Despite some of the nation’s largest distressed discounts as well as one of the highest average returns for home flippers, it does not appear that flippers were especially active in the area. As of the first quarter, flips accounted for just 3.6% of sales — about in line with the U.S. overall.

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6. Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md.
> Return on investment: 56%
> Avg. gross profit: $92,680 (24th highest)
> Flipped price: $258,364 (32nd highest)
> Number of flips: 122
> Flips, pct. of home sales: 2.0% (7th lowest)

The percent of houses flipped in the Philadelphia metro area was among the lowest in the nation in the first quarter. High home values may be the reason flippers shy away from the market — despite the previous high returns. In March, buyers paid a median price of $175,000 for a non-distressed home, and $80,000 for a distressed home, both exceptionally high among the most lucrative home flipping markets. House flippers who were able to afford homes in the area earned lucrative profits. The average dollar return of a flipped home in the first quarter was $92,680, among the highest in the country. In February, 7.7% of homes sales in the area were short sales, greater than the majority of areas in the U.S. Short sales may be attractive to home flippers because the homes are often sold at a favorable price for the buyer.

5. Palm Coast, Fla.
> Return on investment: 57%
> Avg. gross profit: $54,939 (79th highest)
> Flipped price: $151,515 (29th lowest)
> Number of flips: 76
> Flips, pct. of home sales: 14.4% (11th highest)

Palm Coast, a relatively small metro area with a population of less than 100,000, may be attractive to house flippers because of its large tourism industry, and sales of vacation homes in the U.S. were on the rise last year. The number of flips as a percentage of all home sales in the area was 14.4% in the first quarter, among the highest in the country. The $96,577 average purchase price of a home to be flipped in Palm Coast in the first quarter was just over half the nationwide average pre-flip price. Also, flippers may have opportunities to sell to individuals purchasing vacation property. Annual sales of vacation homes in the U.S. jumped by nearly 30% in 2013, according to the National Association of Realtors’ 2014 Investment and Vacation Home Buyers Survey.

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4. Omaha-Council Bluffs, Neb.-Iowa
> Return on investment: 59%
> Avg. gross profit: $37,425 (30th lowest)
> Flipped price: $100,912 (9th lowest)
> Number of flips: 271
> Flips, pct. of home sales: 12.2% (16th highest)

Average return on investment on a flipped home in the Omaha metro area increased by more than 10 percentage points in the first quarter from a year ago, a larger growth than most other metro areas. However, the dollar amount gained from flipping declined substantially, from $55,546 last year to just $37,425 in the first quarter of 2014. This means the higher returns were due primarily to plummeting home prices. Last year, flippers purchased homes for an average price of $116,171. This year, the average pre-flip purchase price was just $63,486, much lower than half the national average price of $183,276. Flippers could also find relatively low prices by buying on distressed homes, with prices for distressed homes discounted 54.6% as of March, among the largest discounts nationwide. Unlike several regions with lucrative home flipping markets, the Omaha area’s unemployment rate of 4.5% in March was considerably lower than the national rate.

3. Deltona-Daytona Beach-Ormand, Fla.
> Return on investment: 68%
> Avg. gross profit: $45,030 (38th lowest)
> Flipped price: $110,812 (13th lowest)
> Number of flips: 72
> Flips, pct. of home sales: 4.2% (35th lowest)

Relatively cheap homes along Florida’s coast, where the Deltona metro area is located, may be enticing to home flippers. The average purchase price of a flipped home was just $65,782 in the first quarter of 2014, far less than half of the national average. Tourism is among the top industries in the area, and vacation homes and rentals are abundant. One potential source of demand There are signs that the local economy is improving, as Deltona’s unemployment rate fell to 6.3% as of March, 1.2 percentage points below what it was in March 2013. That could push up future home prices in the area even more and make the area more attractive to home flippers. In each of the last two years, the return on investments for home flippers has been more than double the national average return. Despite this, flips accounted for just 4.2% of home sales in the last quarter, roughly in line with the 3.7% nationwide.

2. Pittsburgh, Pa.
> Return on investment: 89%
> Avg. gross profit: $48,806 (46th lowest)
> Flipped price: $103,755 (11th lowest)
> Number of flips: 90
> Flips, pct. of home sales: 2.2% (9th lowest)

Distressed homes in Pittsburgh were sold at exceptionally higher prices in the first quarter compared to a year ago. The median price of a distressed home rose 125.2% as of March compared to the same month last year, by far the largest growth nationwide. Just 2.2% of home sales were flips last quarter, but investors were able to turn a nearly 90% profit, second only to Reading, Pennsylvania. Profits were considerably higher from a year ago, when flippers earned just 53% on their investments. While home prices are up in Pittsburgh and in much of the nation, home flippers in the area were able to find initial investments for just $54,949 on average, less than a third of the national average of $183,276 during the first quarter.

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1. Reading, Pa.
> Return on investment: 131%
> Avg. gross profit: $100,667 (18th highest)
> Flipped price: $177,733 (39th lowest)
> Number of flips: 76
> Flips, pct. of home sales: 11.9% (18th highest)

Reading, Pa. was the most profitable area in the U.S. for home flippers in the first quarter. Home flippers made an average 131% return on investment in the first quarter, with an average dollar return of $100,667. Home flipping activity in the area was quite high in the first quarter, as flipped homes accounted for 11.9% of home sales, well above the U.S. rate of 3.7%. Reading’s economy has been recovering, perhaps making the area attractive to home flippers, as an improving economy typically leads to higher property values. Its unemployment rate dropped to 6.3% at the end of March, down 1.6 percentage points from the end of March 2013 and about inline with the lower than the national rate of 6.8%.

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