House-flipping at six-year high; Dayton seen as prime market

Realtor and house flipper Michelle Nevius-Haines plants her sign at house she is renovating in Kettering. TY GREENLEES / STAFF
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Realtor and house flipper Michelle Nevius-Haines plants her sign at house she is renovating in Kettering. TY GREENLEES / STAFF

Rising home prices coupled with a still plentiful supply of cheap foreclosures and fixer-uppers is once again attracting investors, rehabbers and other house-flippers, lured by the prospect of healthy profits in a still recovering housing market.

Home-flipping — or buying foreclosed or distressed properties and then renovating and selling them — is at its highest level nationally since 2010, according to the most recent data from the industry data tracker, ATTOM Data Solutions, formerly RealtyTrac.

Realtor and house flipper Michelle Nevius-Haines, right, works with her husband Ron Haines in a house she is renovating in Kettering. TY GREENLEES / STAFF
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Realtor and house flipper Michelle Nevius-Haines, right, works with her husband Ron Haines in a house she is renovating in Kettering. TY GREENLEES / STAFF

In the second quarter alone, more than 51,000 U.S. single family homes and condos were flipped, which ATTOM defines as any home bought and resold within a 12-month period, excluding purchases by banks and government entities.

In Ohio, 1,925 homes were flipped in the second quarter this year, yielding an average gross profit of $54,900 — a whopping 92 percent return on investment, according to ATTOM. In the Dayton metro area, 203 flips were concluded in the second quarter with an average gross profit of $52,000, or an 86 percent average return.

Realtor and house flipper Michelle Nevius-Haines, top, works with contractor Sean Wareing in a house she is renovating in Kettering. TY GREENLEES / STAFF
Caption
Realtor and house flipper Michelle Nevius-Haines, top, works with contractor Sean Wareing in a house she is renovating in Kettering. TY GREENLEES / STAFF

Local flippers have benefited from drastically lower entry prices than in many other housing markets, said ATTOM’s Daren Blomquist.

“On average, the flippers in Dayton who are buying properties are buying them at 42 percent below full market value, which is a huge discount,” Blomquist said. “On the flip side, they’re selling at a 12 percent premium above fair market value.”

Flips accounted for about 6 percent of total sales in the second quarter, and helped boost the average sale price in the Dayton market by about 4 percent to $146,808 through the first nine months of the year, compared to the same period in 2015. At the same time, foreclosures and other distressed properties can still be found in desirable neighborhoods in the Dayton area.

According to ATTOM, the three most active communities for home-flipping in the local area were Huber Heights, where 25 homes flipped in the second quarter of the year; Kettering, with 17 flips; and Xenia, where 12 homes were flipped during the three months.

Michelle Nevius-Haines, a local Realtor who has been flipping homes for more than 20 years, said turning a profit isn’t as easy as it may seem, even in a prime flipping market.

While the gross profit figures may be tantalizing to investors, she said, they’re simply the difference between the purchase price and sales price. They do not include renovation and carrying costs, such as unpaid property taxes or escrow fees, as well as “inevitable” unexpected expenses, she said.

“If you need a new roof on a property, you’re going to be hit with an $8,000 to $10,000 bill that’s going to drastically cut into your profits,” said Nevius-Haines, who is preparing to list her most recent flip at 3600 Stoneview Court in Kettering. “Costs can add up quick, and when you’re buying a property out of foreclosure in as-is condition, there are just so many surprises that can knock you back. People see these flipping shows on TV, and they think this it’s easy. Then they get into it, and they’re losing their properties or selling them for a loss.”

Nevius-Haines said her best advice for first-time flippers is to be honest about how much of the renovation work they can do themselves to “build a cushion” into their budget and protect against cost overruns.

“When I walk through a home and put the numbers together, I ask myself what would be the worst-case scenario, and base my offer on that,” she said. “ I’ve broken even a few times, but I’ve never had a loss.”

Finding properties at the right price in the right location can be challenging. But experts say the Dayton area remains one of the hottest markets for flipping in the country because of the steady demand for homes and tight inventory of available properties.

That was underscored by the September numbers put out by the Dayton Area Board of Realtors, which reported a 9 percent year-over-year decline in listings for single-family homes and condominiums.

“There aren’t a ton of new homes being built providing new inventory, and homes that have been renovated well are kind of the next best thing to a new home for some buyers,” Blomquist said.

Flipped homes often attract buyers to neighborhoods they would normally shy away from, he said.

“These are neighborhoods where there are buyers coming in and saying even though this neighborhood might not be the best, it’s starting to transition and get better, and they’re willing to take a chance on some of these neighborhoods,” he said.

What is house flipping?

ATTOM Data Solutions, formerly RealtyTrac, defines it as any home that was bought and resold within a 12-month period, excluding purchases by banks and government entities. Flippers typically buy or foreclosed or distressed properties and then renovate and sell them. The practice can be profitable. In Ohio, 1,925 homes were flipped in the second quarter of this year, yielding an average gross profit of $54,900.

By the numbers

51,000: Number of U.S. single family homes and condos flipped in second quarter of 2016.

203: Number of ‘flips’ recorded in the Dayton metro area in the second quarter.

86: Percentage return on investment for homes flipped in the Dayton metro area.

$52,000: Average gross profit.

Source: ATTOM Data Solutions