Flipping a home is more of an art than a science. While budgets should be a consideration for any real estate investor, creating a home that someone wants to live in so much that they’ll put in an offer above asking price is paramount. But that’s tough in some areas where lot values are skyrocketing and materials costs are through the roof. But more budget-friendly areas, neighborhoods where you can get a lot of house for a little, are becoming more attractive to flippers.
In Dallas, that area is the 75216 Zip code. For the uninitiated, that’s a vast swath of southern Dallas between Interstate 35 East and Interstate 45 just north of Loop 12. Neighborhoods such as Cedar Crest. Interestingly enough, according to Realtor.com there are just 84 single-family homes on the market in this area, and 152 listings total. Seems like a hot area, but that could change because flipping is actually slowing down. At least that’s what ATTOM Data Solutions says.
The company, which calls itself the “curator of the nation’s largest fused property database,” said that the number of homes flipped in the US has actually decreased from the 6-year high reached in the previous quarter. That’s falling from a 5.6 percent flipping rate to 5.1 percent, or from 53,892 flipped homes to 49,305. Flippers buying with cash accounted 67.9 percent, down from 68.2 percent in the previous quarter and down from 69.0 percent in Q3 2015 to the lowest level since Q3 2008 — an eight-year low.
According to ATTOM, a flip is a home sold for the second time in a 12-month stretch. The company surveys more than 950 counties, which comes out to approximately 80 percent of the American population. Let’s see what that looks like in 75216.
From ATTOM’s data, there were 20 flips in 75216 for the third quarter of 2016, or 25.3 percent of sales. Quarter over quarter, that’s a 64 percent increase in flips, and year over year, that’s a jump of 131 percent. The median purchase price for these 20 flips was $44,610, while the media sales price was $92,103. That’s a gross profit of $47,493 per home. Not bad margins, especially considering the quality and cost of materials in many of these flips. Take 1435 Renner Dr. in Cedar Crest for example. It’s a three-bedroom, two-bath, 1,595-square-foot home built in 1944 on a quarter of an acre. It was listed on Monday, Dec. 5, for $125,000. According to the Dallas County Appraisal District, it’s worth $34,130.
According to Keller Williams Dallas Premiere listing agent Isabel Villatoro, the home features new paint inside and out, laminate flooring, granite countertops in the kitchen, a new roof, new hot water heater, all new electrical wiring, and will have a brand-new AC unit upon closing.
Now, because we’re a non-disclosure state, we don’t really know how much this home was purchased for. Typically, the DCAD appraisal will be quite shy of the actual sales price. In this case, let’s just assume that the home was purchased for around $55,000 and needed to be completely overhauled. Even with $20,000 worth of work, you’re still looking at $50,000 in profit. No wonder why this area’s so popular with investors.
Of course, this home would fall into the category of less-than-stellar flips. Heck, the new siding that was installed would give an OCD person an aneurysm. How much harder is it to tear out the siding on that wall and replace it? Or to do the same in the front? It just looks like a cut corner, to me at least. Of course, not every flip is a natty cottage in Northwest Dallas with marble on every surface, we realize.
Need more takeaways, ATTOM offers these points:
- Homes flipped in Q3 2016 took an average of 180 days to flip, down from a 10-year high of 185 days in the previous quarter, but still up from an average 176 days a year ago.
- More than half (53 percent) of all homes flipped in Q3 2016 were sold by the flipper for $200,000 or less, while 33 percent of all homes flipped during the quarter were sold by the flipper for between $200,000 and $400,000. Homes flipped for $500,000 or more accounted for less than 9 percent of all flips during the quarter, and homes flipped for $1 million or more accounted for less than 2 percent of all flips during the quarter.
- Flipped homes sold by the flipper for between $50,000 and $200,000 yielded an average gross flipping ROI of 58 percent, the highest among price ranges in the third quarter. Homes flipped for between $2 million and $5 million yielded an average gross flipping ROI of 26 percent, the lowest among price ranges for the quarter.