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Home flipping, which has become increasingly popular in recent years, can be a very lucrative business.
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In fact, Motley Fool reported, citing research from Atom Data Solutions, that “8% of home sales in 2023 will be resales, up from 5.7% in 2016. The report also reports that the return on investment (ROI) in 2023 will be 27.5%, with an average gross profit of $66,000.
Figuring out the exact ROI for a property that needs fixing up can be difficult because there are so many variables at play, according to Alex Blackwood, co-founder and CEO of alternative real estate investing app Mogul Club.
“The nature of the fix-it-and-resale process means there are a lot of potential risks involved,” Blackwood continues, adding that not only do you need to consider the cost of repairs, but also where you position yourself in a market where prices are rising.
“Otherwise you could be stuck with newly renovated properties in a market where sales are low,” he warned.
However, not all fix-it-and-flips are the same, and there are several factors that can affect the success – and profit – of a fix-it-and-flip, including the type of renovations you make and, of course, the location of the home.
Miles Robinson, CEO of UK Composite Doors, has experience flipping homes in both Miami and Los Angeles.
“My first renovation in Los Angeles was a midcentury modern home,” Robinson recalls. “Using my background and expertise, I focused on efficient heating solutions, modern doors and stylish interior updates.
“With a preference for eco-friendly and modern aesthetics in the Los Angeles market, this approach has paid off big time, with property values soaring due to demand for modern, energy-efficient homes.”
When it comes to Miami, he noted that luxury and outdoor living are key.
“I renovated the waterfront property, installed state-of-the-art composite doors, and upgraded the HVAC system to efficiently handle the humid climate,” he said, explaining that the combination of luxury and durability has significantly increased the property's resale value.
“The Miami market is booming with luxury, durable upgrades that enhance both comfort and style,” he added.
According to a recent Frontdoor report, “the cities that will benefit most from renovations are concentrated along the coasts, particularly the West Coast, with six California cities in the top 10.”
Here are the 10 cities where you can make the most money from fixing up and flipping a property, according to FrontDoor.
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Miami
Median home price: $655,000
Return on investment: +17.67%
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Charleston, South Carolina
Median home price: $725,000
Return on investment: +17.38%
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Los Angeles
According to Zillow, the average median home price is $972,829.
Return on investment: +17.19%
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Long Beach, California
Median home price: $799,000
Return on investment: +16.95%
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San Jose, California
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Anaheim, California
Median home price: $938,900
Return on investment: +16.88%
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Santa Ana, California
Median home price: $835,000
Return on investment: +16.81%
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Scottsdale, Arizona
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San Francisco
The average median home price is $1.4 million, according to Redfin.
Return on investment: +16.6%
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St. Petersburg, Florida
According to Zillow, the average median home price is $383,372.
Return on investment: +16.37%
All average home prices are taken from Realtor.com unless otherwise specified.
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This article originally appeared on GOBankingRates.com: 10 Most Profitable Cities for Fix-Up and Resale Properties