Fix and resell investments are exactly as the name suggests: properties that you both fix and resell.
It's a simple strategy popularized by reality home-renovation stars over the past 15 years or so: buy a house in poor condition, fix it up smartly and affordably, and sell it at a profit.
The secret to successful real estate flipping is buying properties below market value and then increasing their value through strategic repairs and upgrades. To do this, investors need to find the right market. Some investors look for the hot markets they see in the headlines, but the reality is that fix-and-flip investors can be successful in many locations as long as they understand the market at both the metropolitan statistical area and neighborhood level.
ATTOM has identified two key trends in the fix-and-flip market for 2024 that define national trends that will impact investor returns.
Homes are being resold faster. As high interest rates slow the overall market, the percentage of resale homes as a percentage of total home sales remains historically high.
Canton is a great example of both trends, ranking in the top five markets nationwide for repair and resale profits among communities with populations of 100,000 or more.
While fourth-quarter property resale numbers show the slow transaction volume typical of the winter months, investors should keep an eye on national trends to ensure property resales remain profitable, highlighting the importance of finding the right property to resell in a value-driven market like Canton.
Why is Canton so great for home resale?
One of the reasons Canton is a robust real estate investment market is that the median property price is lower than hotter markets and larger metropolitan areas in 2024. Lower than average property prices make it easier for a wider range of investors to resell properties.
Additionally, cheap real estate gives investors a better chance of getting a dollar-for-dollar return on their investment. Traditional Rust Belt markets such as Canton have traditionally performed well for investors in high interest rate markets because the types of resales common in these markets fill a need for working-level housing that will always be needed regardless of the economic climate.
This means that even modest rents can cover the costs of purchasing and reselling the property, allowing flippers to profit from holding the property in their rental portfolio. Additionally, the overall lower price of a completed resale property makes it easier to sell, even when interest rates are high. These two options give flippers multiple successful exit strategies.
How Flip Works
The fix-and-flip process involves buying cheap, adding value through renovations, and selling at a profit (or holding the property as a rental).
Investors usually look for distressed properties that they can purchase below market price. To do this, they scour the market for undervalued properties that have the potential to increase significantly in value. Some of these properties may be in poor condition, while others may have severely outdated kitchens, bathrooms, floors, and wallpaper that need to be thoroughly updated.
Once they have acquired the right property, investors must take several steps, including creating a budget, hiring contractors, obtaining necessary permits, and making sure renovations are in line with market trends and buyer preferences.
Right-sizing a resale property is very important because you want to ensure that the finished property isn’t overpriced compared to the surrounding area or lacking features or upgrades that will make it difficult to sell or rent.
How long does it take to resell a house?
The average time it takes to flip a home varies widely depending on factors such as:
Extent of Renovations: Properties that require extensive renovations will naturally take longer to resell than those that only require cosmetic upgrades. Market Conditions: Housing demand and local market conditions can affect how quickly a resale property sells. In a booming market where inventory is scarce, homes may sell faster, while in a sluggish market, it may take longer to find a buyer. Permits and Approvals: Delays in obtaining permits or approvals for renovations can significantly lengthen the timeline. Financing: Securing financing for the purchase and renovation of the property can also affect the timeline. Cash buyers may be able to close the deal sooner and complete renovations without having to draw down on construction funds compared to buyers who rely on financing, which can be quicker.
Once renovations are complete, the investor can then either put the property on the market or refinance the loan into a long-term mortgage and own it as a cash-flowing rental property. Utilizing effective marketing strategies and staging the property can help attract more potential buyers or renters and ensure a timely result at a favorable price.
The figures show this is happening across the Canton market, resulting in improved housing stock and making communities better places to live.
Robert Neely is director of marketing for Lima One Capital in Greenville, South Carolina.