Best Cities To Flip Houses in 2020
For real estate investors who like to buy houses, remodel them, and then sell them for a profit, this is a great time for finding and capitalizing on hot properties in dynamic markets. Its time to look for the best cities to flip houses in 2020! The better news is that real estate markets in several cities are stand-out opportunities, which makes “Fix and Flip” investors even more excited. America’s aging population along with first-time buyers tend to buy affordable homes that are updated, upgraded, and available in the right place at the right price. Fix and flippers have an excellent opportunity to take advantage of these two groups that make 2020 and the future beyond highly attractive for smart real estate investors.
What are Fix and Flips?
For many decades, real estate investors have learned how to find distressed real estate that can be rehabilitated and then re-sold for a handsome profit. Homes that have been foreclosed and commercial properties that have been abandoned are excellent targets for experienced Flippers. By purchasing a property at a low price due to its stressed condition and then updating and upgrading the property using subcontractors, a savvy real estate investor can control costs while gaining from the value the enhancements have added.
Real Estate Market Considerations For Fix and Flip Investments
Fix and flip only works in active and improving real estate markets. Active markets can occur in local, regional, or even state-wide. Investors must use caution when deciding which markets offer the best chances for success. In general, the following conditions should be considered when qualifying a potential market for fix and flip investment:
- – When a city experiences economic expansion, the new jobs attract real estate buyers.
- – The lower the investment cost, the better the chances of making a bigger profit. Purchasing high-cost real estate or lower-cost properties depends on the investor’s preferences and pocketbook.
- – Active real estate markets offer the best opportunities to exit one project and engage in another increasing the number of opportunities that can be capitalized upon.
- – The bottom line is always going to be a factor. Areas where profits are higher are more attractive to investors but also create competition for available inventory of distressed real estate.
- – For many investors and investment groups, the return on the original investment is the deciding factor when considering where to place funds. Return thresholds often dictate which markets qualify and which markets don’t.
Other Considerations For Fix and Flip Investing
Financial information is important to evaluate before determining where to purchase a fix and flip property, but there are other factors to consider as well.
- Cost and availability of labor, materials, and construction equipment costs are extremely important. It doesn’t do any good to find a great deal on a property only to discover there’s no one available to do the work needed.
- Real estate development projects close to a rehabilitated property may cause unexpected competition and reduce sales prices.
- Neighborhood redevelopment plans or zoning changes under consideration by local housing authorities may impact a property’s future value, taxation levels, and improvement expenses for things like street lights, curb and gutter, sidewalks, sewers or water lines, and road surface improvements.
What are the Best Cities To Flip Houses in 2020?
The best real estate markets for fix and flip properties are markets that are experiencing growth. According to a US News & World Report article published in May of 2019, the following cities are expected to have the largest amount of growth in the next few years:
- Midland, TX- Population 178,000 – Expected growth 4.3% = 7,650 increase
- Myrtle Beach-Conway-North Myrtle Beach– Population 480,000 – Expected growth 3.8% = 18,250 increase
- St George, Utah– Population 171,500 – Expected growth 3.5% = 6,000 increase
- Lakeland-Winter Haven, Florida– Population 709,000 – Expected growth 3.2% = 22,700 increase
- Odessa, TX– Population 162,000 – Expected growth 3.2% = 5,200 increase
- The Villages, Florida– Population 128,750 – Expected growth 3.1% = 4,000 increase
- Greeley, Colorado– Population 314,000 – Expected growth 3.0% = 9,500 increase
- Boise City, Idaho– Population 730,000 – Expected growth 2.9% = 21,000 increase
- Bend-Redmond, Oregon– Population 192,000 – Expected growth 2.8% = 5,400 increase
- Provo-Orem, Utah– Population 633,750 – Expected growth 2.6% = 16,500 increase
Negotiating the Best Price for Fix and Flip Property
Budgeting repairs and upgrades for a property only takes place after a successfully negotiated purchase price. Some real estate is privately-owned and negotiations take place with the owner. However, many of the most attractive properties come available due to foreclosure, failure to pay property taxes, and abandonment. In these cases, buying real estate from a city or state agency takes additional resources and carries greater risk. When property is sold via public auction, investors should know in advance what their purchase price limit will be. Many investors make the mistake of becoming emotionally attached to a property to the point they pay too much for it in a competitive bidding situation.
Paying For Fix and Flip Projects
Financing a fix and flip project property is not like getting a mortgage for a home. Flippers aren’t going to be invested any longer than absolutely necessary because the interest on borrowed money can quickly reduce a project’s profitability. Investment groups and individuals may use their own capital to acquire and rehabilitate properties, but in many cases, a short-term loan can provide the needed funds for purchasing and upgrading the property. Different ways to finance a fix and flip project include:
- Traditional mortgage or bank financing – standard terms and down payments.
- Home Equity Line of Credit (HELOC) – borrow against homeowner equity in existing property.
- Private or hard money loan – short-term, high-interest capital that has a faster turnaround time than a traditional loan.
Fix and Flip is Like Other Real Estate Investments
The business of fixing and flipping real estate takes a keen eye for good real estate deals, sufficient capital to accomplish refurbishing the property completely, and the means to get the job done with labor, materials, and equipment. If any of the major concerns aren’t met, disaster can quickly follow. Budgeting time, finances, and resources appropriately can result in substantial profit for a relatively short-term investment. Success hinges on the same conditions as any other real estate investment opportunity – the ability to understand the marketplace and where the best deals can be made.