In previous posts, it’s been mentioned that Memphis is the best metropolitan area to invest in turnkey rentals (that's still accurate). Turnkey is great if you want to be a landlord but what about flipping houses? Well, the data is in and it turns out that Memphis is also the hottest market in the nation for flipping houses!
Attom Data Solutions recently released its 4th quarter of 2018 report showing 29.5% of all home sales in Memphis were flipped. Attom’s definition of a flip is a house that was bought and sold again within 12 months.
To be very specific, that data comes from zip code 38141 (Oakhaven neighborhood). There are about 8,000 residential units in this area with a median value of $97,200 and median household income slightly above $51,000. The median age of the population is 31, which makes this an ideal neighborhood for first time buyers.
Also of interest to flippers is the majority of these homes were built in the 1980s, making for very good rehab and flip potential. Another important statistic about the Oakhaven neighborhood is that 73% of homes are owner occupied (significantly above the 64.8% national average).
Tennessee, as a state, is also number one for house flipping (May 2018 data). This is based on an average return on investment of 133% and an average profit of $57,600. Also noteworthy is the average time to flip at these profit levels was only 147 days (4.9 months).
Still, Memphis remains the standout according to Attom Data Solutions. With 11.7% of house sales being flips, it is head-and-shoulders above the other top five markets. Memphis flips 2.6% more houses than the #2 nearest major city and a full 4.1% more than the #5 top market.
“Among 53 metro areas analyzed in the report with at least 1 million people, those with the highest home flipping rate in 2018 were Memphis, Tennessee (11.7 percent); Phoenix, Arizona (9.1 percent); Las Vegas, Nevada (8.7 percent); Tampa-St. Petersburg, Florida (8.2 percent); Birmingham, Alabama (7.6 percent).”-Attom Data Solutions
Two big attractions to Memphis house flipping are the low cost to purchase and fast sale turn around. Memphis is again the standout as the number one major city for fast turnaround. When combined with the low cost to enter the market, the risk becomes lower and the rewards become higher. When this is further combined with the attraction to the sunny mild climate, work opportunities, and metro attractions, the decision to flip houses in Memphis becomes a no-brainer.
There are other ways to rank top flipping markets. On a purely high dollar basis, you’ll find markets where listing prices are above $500,000 and the gross profit easily exceeds $100,000. But on a ROI basis, that is only a 20% profit. High end houses also stay on the market longer. That equates to turning your money less often, which brings down the annual ROI even further. Also, at those ultra-high dollar values, buyers demand near perfection in the rehab. Get one small thing wrong and the profit goes down while time on the market goes up.
What makes the most sense for ranking flip markets are low listing prices and fast turn rates. Major markets ranking near the bottom of these studies saw houses sitting on the market an average of 203 days (compared to 147 days for Tennessee). These markets also had hundreds of thousands of dollars in capital tied up compared to tens of thousands in Memphis. Where you chose to flip houses makes a tremendous difference in the risk and reward you can expect.
Please comment with your house flipping thoughts and experiences. Also, our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions, inquiries, or article ideas to [email protected].