If you're good with a hammer and a money-saving real estate genius, you could make a pretty good living flipping a house — but only if you invest in the right market to profit from your home's potential.
When it comes to real estate investing, buying low and selling high may seem like a no-brainer. But fans of HGTV's “Flip or Flop” and A&E's “Flipping Vegas” know that behind the drywall, stucco and wood framing of any home can lurk potentially budget-busting expenses that will cost more to fix than they will generate profits. That's why it's important to invest in real estate markets where demand is high, housing inventory and renovation costs are low.
But flippers beware: Even if you take every measure to make a flip successful, renovating a rundown, low-cost property doesn't necessarily mean you'll recoup your full investment, or pocket the extra $63,500 that was the average gross profit from a flip in the first quarter of this year, according to WalletHub. Plus, RealtyTrac reports that homeownership rates are currently at 65.6%, down from an all-time high of 69.2% in 2004.
But if you're still determined to transform the neighborhood's worst house into a model home, WalletHub can help you find the best markets for your business. The personal finance website compared 172 U.S. cities on 26 key metrics out of 100, with 100 representing the most favorable conditions for home flipping. WalletHub then assessed market potential (out of 35), renovation and remodeling costs (out of 35), and quality of life (out of 30), and ranked each city by its total score.
Here are the top 10 best places to flip a house, in ascending order.
10. Knoxville, Tennessee
A housing shortage is driving up home prices in the city and increasing demand from the suburbs. Knoxville ranked 15th in both market potential and renovation/renovation costs, but 94th in quality of life. Overall score: 66.89.
9. Gilbert, Arizona
Located in Maricopa County, this Phoenix suburb reportedly has the second-highest average salary among the areas surveyed. Gilbert ranked second for quality of life, 41st for market potential, and 68th for cost of renovation and remodeling. Total score: 66.90.
8. Rapid City, South Dakota
Known as the Gateway to Mount Rushmore, people from out of town are investing in housing and tourism in South Dakota's second most populous metropolis. Rapid City ranked 12th in renovation and remodeling costs, but 92nd in quality of life and 98th in market potential. Overall score: 67.
7. Boise, Idaho
Idaho's capital city blends a small-town feel with big-city amenities, making it one of the most dynamic housing markets in the country. Boise ranked 10th in both quality of life and renovation/remodeling costs, but 94th in market potential. Total score: 67.09.
6. Mobile, Alabama
Founded in 1702, this southern coastal city is tied with Columbus, Georgia for third lowest average purchase price and first lowest average kitchen remodeling cost. Mobile also ranks first in market potential and 21st in remodeling and renovation costs, but 139th in quality of life. Overall score: 67.15.
5. Tampa, Florida
There's never been a better time to flip a home in this warm climate. Get in touch with distressed homeowners before they foreclose and you might be able to get a deal below market price. Tamps is ranked 25th in both market potential and renovation/remodeling costs, and 31st in quality of life. Overall score: 67.43.
4. Nampa, Idaho
Located 20 miles west of Boise, Nampa is a magnet for young professionals and tech executives with deep pockets who love the outdoor life. Nampa ranks #4 in renovation and remodeling costs and #11 in quality of life, but #106 in market potential. Overall score: 67.69.
3. Peoria, Arizona
High housing demand in this Phoenix suburb has drawn home seekers hoping to strike it rich by fixing up and flipping. Peoria ranks 11th in cost of renovation and remodeling, 21st in quality of life and 55th in market potential. Total score: 67.84.
2. Missoula, Montana
With homebuyers from the suburbs seeking out Missoula for their new home, this Montana city is a great place to make a remodel and resale investment. Missoula ranks 6th in market potential, 28th in cost of renovation and remodeling, and 57th in quality of life. Overall score: 68.21.
1. Sioux Falls, South Dakota
Fueled by all-cash purchase offers and low mortgage rates, the current home-buying fever in South Dakota's largest city doesn't seem to be subsiding anytime soon. Sioux Falls ranks 9th in renovation and remodeling costs and 32nd in quality of life, but 125th in market potential. Overall score: 71.37.