As prices spike in white-hot housing markets such as California and New York, many home flippers are abandoning the ridiculously expensive coasts and heading for more profitable pastures—down South.
These intrepid real estate investors are seeing the biggest returns on their investments in Louisiana, according to a recent report from real estate data firm ATTOM Data Solutions. The company analyzed sales deed data in the second quarter of the year to come up with its quarterly ranking. Only properties that were sold twice within a 12-month period were included.
“The Southeast in general is a hot spot for flipping, as well as some parts of the Rust Belt,” says Daren Blomquist, senior vice president at ATTOM. “There are still deals to be had in those markets.”
That’s appealing to flippers who are seeing their profits squeezed by high home prices, which are continuing to soar. Returns are down to their lowest point in nearly four years, falling from a high of 50% in the second quarter of last year to 44.3% in the second quarter of this year. (Returns are the difference between the purchase and sale price of a home. They don’t take into account the cost of labor and construction materials for the rehab.)
Flippers made an average $65,520 in the second quarter of this year—a 5.7% drop from the previous quarter, according to ATTOM.
“The market is so hot that even homes that need a lot of work are selling close to market value, which leaves home flippers with less ability to make a profit,” Blomquist says.
Where home flippers are making the most dough
So why is flipping in Louisiana so lucrative, with returns of about 102.5%?
“The floods in the Baton Rouge [and Lafayette areas] in 2016 damaged a lot of homes” in Louisiana, Blomquist says. “It’s a little morbid, but it’s an opportunity for home flippers to come in and buy those damaged homes, fix them up and resell them.”
Many flippers down there are scooping up single-family homes on the cheap, rehabbing them and selling them to other investors who are renting them out.
Louisiana was followed by Pennsylvania, at 100.3%; Ohio, at 81.4%; Maryland, at 76.1%; and Tennessee, at 74.9%.
Meanwhile, flippers made the biggest bucks in ZIP code 35211 in Birmingham, AL, where the returns on investment were 352.4%; 63118 in St. Louis, MO, at 351.6%; 37344 in Fayetteville, TN, at 323.7%; 19144 in Philadelphia, at 294.1%; and 07017 in East Orange, NJ, at 273.1%. ATTOM looked at 1,451 ZIP codes with at least 10 flips in the second quarter of the year.
“Investors got priced out of Atlanta and said, ‘Where is there a good market fairly close by that we can invest in?’” Blomquist says. “And Birmingham became the beneficiary of that.”
Where homes are being flipped the most
Flippers may be making the some of the highest returns below the Mason-Dixon Line, but that doesn’t mean all of the flippers have moved south. The highest flipping rates (that is, the areas where the highest percentage of total home sales are flips) were in Washington, DC, at 8.3%. The nation’s capital was followed by Nevada, at 7.4%; Tennessee, at 7.2; Arizona, at 6.7% and Maryland, at 6.5%.
On a ZIP code level, the highest home-flipping rates were in 11950 in the Long Island, NY, city of Mastic, at 35.3%; 78537 in Donna, TX (near McAllen, TX), at 32.3%; 11717 in the Long Island city of Brentwood, NY, at 28.2%; 35214 in Birmingham, AL, at 27.4%; and 38109 in Memphis, TN, at 27.2%.
Source: Housing Trends Feed