According to ABODO, Dallas' 75216 Zip code is a hotspot for flippers. (Map: Google Maps)

According to ATTOM Data Solutions, Dallas’ 75216 Zip code is a hotspot for flippers. (Map: Google Maps)

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.

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What happens when an investment property falls short?

What happens when an investment property falls short?

I’m sure real estate investors work very hard to manage the properties they purchase, to ensure that they not only net a good profit, but become a great home potential buyers. Quality materials, attention to detail, and preserving a home’s character are all parts of making a good flip a great one.

But some investment properties miss the mark. Whether generic cabinetry, poor planning, or bad layouts, some investments end up being properties that still need plenty of work. Today’s Tuesday Two Hundred is a great example of a so-so renovation that is on the cusp of being good.

Let’s find out why:

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Jenni Stolarski has flipped some amazing properties in North Oak Cliff.

Jenni Stolarski has flipped some amazing properties in North Oak Cliff, including this one at 806 N. Windomere.

We were intrigued by a story from Bloomberg News citing RealtyTrac figures reportedly showing a nationwide decrease in flipping:

Home flipping, in which a buyer resells a property quickly for a profit, is on the decline as U.S. residential price gains slow and foreclosures dwindle.
Almost 31,000 single-family houses were flipped in the second quarter, representing 4.6 percent of U.S. home sales, RealtyTrac said in a report today. That’s down from 6.2 percent a year earlier and the smallest share since the first three months of 2012, when prices bottomed after the crash, according to the Irvine, California-based data company, which defines a flip as a property sold within 12 months of purchase.

Of course, I had to consult the two best “flippers” I know to see what the local perspective is on flipping. First I got in touch with Jenni Stolarski of Briggs-Freeman Sotheby’s. Stolarski does high-end flips in Oak Cliff, producing some of the most gorgeous homes I’ve ever seen. One of the most recent ones was an amazing Tudor transformation that was awash in marble and chrome. Total jaw-dropper.

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NetWorth Before and after 2When we think about the buying side of the residential real estate market, the vision that most often pops into our heads is a young couple, eager to get the keys to their first-ever home.

Of course, that’s not always the case. There are all different kinds of transactions, but the Dallas residential real estate market is becoming more and more appealing to foreign investors. It’s a trend recently discovered by NetWorth Realty principal Mark Bloom and investor Derek Abel.

“The Chinese are investing in the U.S. and specifically Dallas for three reasons: Diversifying investments, new real estate restrictions in China, and the low cost and volatility of property prices,” said Abel. “The Chinese investor is accustomed to flipping properties in China, as this is an extremely popular type of investment.”

Networth Before and After

It sounds like an interesting concept, especially with a pool of investors that can buy a greater number of homes, therefore ensuring a greater return on investment and less risk. And while “flipping” seems synonymous with buying a property, renovating, and then selling that property on MLS, that’s not the kind of transaction NetWorth handles. As Bloom tells it, the properties are presented to investors, who purchase them through a holding company a la carte. From there, Bloom and Abel handle the legwork.

“Mark and I have worked together to create a company that has created a pipeline for Chinese to directly invest in real estate in the Dallas area,” Abel said. “We provide them with market information for purchasing the property, contractor management, and marketing the property for sale. This provides a full-service company for foreign investors to use to invest money in real estate in Dallas with minimal time and effort.”

The company works specifically with Dallas properties, which make very attractive potential investments, Bloom said. After purchasing and selling several properties, Mark has seen that when the purchase price of a potential property plus the amount of repairs adds up to around 70 to 80 percent of the home’s value, that property will show a 15 to 40 percent return on investment in 3 to 6 months. It’s not a hard-and-fast formula, but it works for NetWorth’s purposes.

To me, that seems like a pretty sound investment, which is one of the reasons that the Chinese are looking to buy in Texas.

“At first it was difficult to get some foreign investors to look past New York, Los Angeles, San Francisco, Miami, etc. as Dallas, Houston, Austin, and San Antonio are often overlooked by foreign real estate investors,” Bloom said. “Once we got into numbers and statistics, it was easy for the Chinese investors to see that they were the early adopters in this situation, and if they made the proper inroads now, they would be able to take advantage of years, if not decades, of sustained growth in several major metropolitan areas in the great state of Texas.”

It’s heartening to see that Dallas, and even the whole state, is seen as an attractive investment all over the globe. We’ve been saying for a long time that because of our stable market, Dallas has been able to recover from the housing crisis much faster than markets such as Miami, Atlanta, and much of the East Coast.

Still, foreign investment in single-family homes is still a relatively new concept, Bloom said.

I’m curious: Most of our readers are Realtors who work with single-family homebuyers that will occupy the home they purchase. What do you think about foreign real estate investment in the single-family market?