Too many new investors focus on national news.  Real estate is hyper-local though.  Unless you live in Las Vegas, Phoenix, Washington DC, etc. it doesn’t matter what is happening in those areas.  Your market will be different.  In fact, your market may vary from one side of town to the other.

All of that being said, we do watch what is happening around the country.  In our Market Watch series, we will share details of markets that look ripe for flipping houses.  You can compare these trends to your market and see how it stacks up.

Spokane Washington

Earlier this summer the Spokesman-Review touted how its market was thriving.  Sales of homes on less than one acre were 20 percent higher than last year, the Spokane Association of Realtors reported. Through the first half of the year, 2,469 homes were sold in the county, compared with 2,046 in 2012. The median sales price of all homes sold this year for the city in the first half was  $162,500, or 5.9 percent above last year’s $153,450. The newspaper also stated earlier this year that the market was showing sure signs of rebound, a perfect piece to the real estate investing puzzle. Home sales and prices continued to climb across the Spokane region throughout the year. The number of homes sold so far in 2013 jumped 13 percent compared to the same period a year ago. “Together, those two numbers are helping brokers feel good, that the market is coming back,” said Rob Higgins, executive officer of the Spokane Association of Realtors. Not to mention Spokane’s average home sale price is up 10 percent compared to a year ago. More good news for flippers.

Spokane was enticing enough that flipping gurus FortuneBuilders set their course for the city this fall. For weeks, a deluge of advertisements for these their seminars flooded Spokane radio stations. Call now, said the voice of Than Merrill (FortuneBuilders founder, ex-NFL player, former Flip This House star) and get two free tickets to learn how to rake in profit with very little risk. Spokane is the perfect market, he said, for house flipping. 

Again the important thing to remember is to know your market. Make sure you know what the housing market in your area is doing. Real estate is hyper-local.  You don’t have to be Alex Foley to know that Detroit and Beverly Hills are not the same.  Some markets will lag national trends.  Others will never see the wild fluctuations that ‘hot’ areas such as California, Florida, Arizona, and Las Vegas will see. But there are those isolated not-so-obvious hot spots like Spokane. Remember that flipping houses is particularly profitable when you get both Forced Appreciation and Market Appreciation.

And this just in: http://www.khq.com/story/24066288/10-cheapest-houses-for-sale-in-spokane.

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MarketWatch reports :

For the market as a whole, flips of single family homes fell 13% in the third quarter, according to new research from RealtyTrac, with investors earning a gross profit of nearly $55,000 on each property. But at the higher end of the market, homes seem to flip as quickly as a griddle full of hamburgers. Flipping increased 34% among homes worth $750,000 and over, 42% among $1 to $2 million houses, and 350% for properties worth between $2 and $5 million.

Flipping tends to be most common in cities with a large supply of expensive homes. (To qualify as a flip, a home must be purchased and subsequently sold again within six months.) In fact, more than three-quarters of all high-end flipping took place in five markets: The New York metro area and Los Angeles, San Francisco, San Jose and San Diego.

What’s behind these quick turnarounds? “Flipping happens when prices are rising rapidly even if price levels are low,” says Jed Kolko, chief economist for real-estate firm Trulia.

It’s possible to double the value of a home, says Jeff Salgado, a San Francisco-based realtor. Investors could buy a dilapidated home for $1.2 million, invest $600,000 and sell it for $2.4 million, he says. “Our buying community is driven by the biotech and high tech sectors. These people are brilliant at what they do, but a good portion of them don’t know the difference between a screwdriver and a hammer.”

The Challenges in This Market

The first problem we tackled was the plumbing bursting.  We are repairing the broken plumbing, removing all the damage, and replacing everything. 

Kitchen mid renovation

2. Since the only bathroom on the first floor was the master bath, we really wanted to make it look nice.  Thus, we decided to tile the floor and tub surround. 

Bathroom

3. The 3rd problem we are tackling is the steep hill immediately behind the house.  We will cut into the hill a little, add a retaining wall, and level the area at the end of the driveway to make it more usable. 

Be sure to check back in a few weeks to see the how The Waterfall House turns out and how we plan on selling it. You won’t want to miss the after shots!

To learn more about Part-Time REI visit us at http://part-timerei.com/

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A second look at Flipping Houses in the News

Since we posted our blog about flipping houses in the news there has been even more buzz about rehabbing. Enough that we felt some of the more newsworthly stories deserved a second glance.  It seems every day there is a new list of the “Top 5 Hottest Markets For Flipping Houses”.   Here’s a few articles worth reading on various markets around the country.

CNBC ran this story on how the housing market was heading into the spring selling season stronger than the previous year.  Los Angeles saw some of the earliest signs of the housing recovery.  The story discusses bidding wars and the return of house flippers for the first time since the bubble burst.

Shady investors helped create this mess, but legitimate investors have been an essential part of the housing recovery.  The reason for this is that during the housing bubble, speculators artificially helped inflate prices.   Now, rehabbers are helping to stabilize neighborhoods and preserve, if not raise, surrounding home values.  They are also luring first-time buyers into the marketplace.  But the how long will this fortuitous situation last?  Price increases mean some flippers may not be able to purchase homes and make significant profits.  Don’t wait until this situation passes you by to get into the game.

Flipping houses is on the rise.

According to RealtyTrac’s Midyear 2013 Home Flipping Report , house flipping was on the rise in more than two-thirds of housing markets.  These included New York, Washington D.C., Chicago and several Florida areas–some of the hardest hit with the foreclosures epidemic.  Nationwide, over 136,184 homes have been flipped.

RealtyTrac’s top 5 states for house flipping are as follows:

1. Washington DC, 80%

2.  Nebraska, 62%

3.  Oklahoma, 35%

4.  Pennsylvania, 31%

4.  Florida, 24%

“We’re seeing house flipping exceed what we saw back during the height of the housing bubble.”

—Daren Blomquist, vice president at RealtyTrac

The housing bubble burst caused a ripple effect in other markets, including Nebraska, causing home prices and demand to drop off in recent years, Blomquist said.  That occurred also in Oklahoma and other Midwestern markets.  Now that consumers in those markets have their confidence back , home prices in those markets are rebounding at a faster rate than almost ever before as the market plays catch-up from the down years.

Post a comment below and let us know how your market is doing.

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Forced and Market Appreciation

Today we are going to talk about something very important to investing in real estate—appreciation. Appreciation is the rise in value or price, of your real estate investment.  When you are flipping houses, the property can appreciate (or not) via Forced Appreciation and/or Market Appreciation.  Not understanding how both of these forces are working can turn your LLC into a 501C. So let’s look at forced and market appreciation.

Forced Appreciation occurs when the value of the property increases as a direct result from actions taken by you as the real estate investor.  This is fundamental to flipping houses where you purchase a property that is under market value and complete repairs or upgrades that increase the home’s value.  Sometimes the smallest change can add appreciation to your investment.  Painting a home is almost always one of the best returns you can get when investing in real estate.  The overall goal is to complete the required amount of work especially in the hot spots, but not to over improve the home.

Market Appreciation is a powerful market force that must be accounted for when investing in real estate.  This type of appreciation occurs due to the activities of other buyers and sellers and cannot be controlled by you as the investor.  Market appreciation is hyper-local.  So, it is important to understand the factors that affect your particular city and not get caught up with ‘national’ news.  As an example, the coastal areas tend to swing more wildly than the Midwest.  Just because Miami properties are appreciating at 10% doesn’t mean that the same is true in Tulsa.  For now, Lebron has the edge over Durant here as well.

Of the two, Market Appreciation is both the most important and most overlooked.  In the early 2000’s almost everyone flipping houses in California made money no matter how incompetent they were.  One TV show even had a guy who took the dirty carpet from his apartment and put it in the rehab property.  In the late 2000’s these types of people stopped investing in real estate as they lost the ability to sell their homes.

Obviously, the most profitable time to be flipping houses is when you both types of appreciation are working in your favor.  This is your golden ticket.  In most areas of the country, this is the current situation.  If you’ve been waiting for the right time to get started, it is now.

To lean more about today’s topic check out this link at- http://en.wikipedia.org/wiki/Real_estate_entrepreneur

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