Although slowing home price appreciation driven by rising mort- gage rates has compressed poten- tial returns for renovate-and-resell investors nationwide, the returns are still solid in many markets, particularly those where investors haven’t had the luxury of relying on rapidly rising home prices to pad their profits in the past. OVERLOOKED RENOVATE- AND-RESELL MARKETS An analysis of homes renovated and resold after being purchased on Auction.com in 2022 in nearly 150 metro areas nationwide shows the top markets for reno- vate-and-resell returns are also mostly in smaller, often overlooked areas—with a few exceptions.
The top five markets for highest gross flipping returns—not including rehab, holding, and resale costs—were Scranton, Pennsylvania; Memphis, Tennessee; Tuscaloosa, Alabama; Albany, New York; and Evansville, Indiana. Rounding out the top 10 markets with the highest gross home-flip - ping profits on distressed property purchases were Houma-Thibodaux, Louisiana; the Quad Cities strad- dling the Iowa and Illinois border; Shreveport, Louisiana; Flint, Michi- gan; and Hartford, Connecticut. “PART OF THE SOLUTION“ IN UNDERSERVED NEIGHBORHOODS In exchange for the potentially heady returns in these markets,
local community developers are often taking a risk on highly dis- tressed properties in underserved neighborhoods that other homebuy- ers are avoiding. “I remember being at the courthouse steps, a couple guys they were telling me how I made a big mistake: That homes won’t ap- praise over there. That homes are not going to sell because distressed properties or buying foreclosed properties diminishes the value,” said local community developer Jermaine Morgan of a recent foreclosure auction purchase in his hometown of Columbus, Georgia. “The risk was could I get this property to appraise based on the amount of work that I was going to put into that property. So, I took the risk. After I finished renovating it, not only did I get it under contract, it had multiple offers.” Morgan has been rewarded financially for the risks he’s taken in underserved neighborhoods, but he’s also been rewarded with the satisfaction that comes from being part of the solution rather than part of the problem in these communities. “Those areas that I’m now devel- oping, I grew up in,” he said. “And I remember being in those areas without hot water. I remember what it’s like to have slumlords … I can’t just be a part of that problem. I want to be a part of the solution.” •
Renovate-and-Resell Returns by Market
Avg. Gross Flip Return: Properties Purchased on Auction. com in 2022 and Subsequently Resold
14.9% 50.0% 100.0% 156.2%
Daren Blomquist is vice president of market economics at Auction.com. In this role, Blomquist analyzes and forecasts complex macro and micro-
© 2023 Mapbox © OpenStreetMap © 2023 Mapbox © OpenStreetMap
DISTRESSED PROPERTY PURCHASE DISCOUNT (BELOW AFTER-REPAIR VALUE)
17%
56%
economic data trends within the marketplace and industry to provide value to both buyers and sellers using the Auction.com platform.
thinkrealty . com | 19
Made with FlippingBook Online newsletter