Buyer Beware: Experts Weigh in on Pandemic House Flipping in Detroit. 

The numbers don’t lie — house flipping is seeing a resurgence, with fierce competition coming from every angle.

 

It’s no wonder the house-flipping business is garnering more interest — the profits have been the highest in 20 years according to reports, but fewer people are getting in on it nationally.

 

According to ATTOM Data Solutions, gross returns for home flippers reached their highest level in two decades. ATTOM also credits the pandemic as one of the reasons why this market is getting a lot more traction as of late.

 

“This all happened in the context of the pandemic, which has created unusual circumstances for the housing market to thrive, and that has included the home-flipping business,” said Todd Teta, chief product officer at ATTOM Data Solutions

 

The report found that 57,155 single-family homes and condominiums in the United States were flipped in the third quarter of 2020. A flip, according to the company, is defined as a purchased home that was later sold in the same 12-month period. Those types of flips made up 5.1 percent of all home sales during the quarter — down from 6.7 percent in the second quarter and 5.5 percent in the third quarter of 2019.

 

The drop in activity was likely due to a major shortage of homes for sale, especially on the lower end of the market where flippers generally like to show up.

 

Sales of homes priced below $100,000 were down 22 percent in October year over year, according to the National Association of Realtors. Those priced between $100,000 and $250,000 were practically stagnant. Meanwhile, sales of pricier homes, those between $500,000 and $750,000, were up over 60 percent. The median price of a flipped home nationally in the third quarter was $240,000.

 

Delight Okogeri, real estate agent with Keller Williams Advantage in Novi, said that she has some investors who want to buy and flip homes and want to sell them throughout metro Detroit and the city of Detroit.

 

“People want to invest in Detroit and they feel it is coming back and they want to move back there,” Okogeri said, adding that there is a lot of real estate activity going on in Detroit. She added that there is a shortage of homes on the market, labor/material shortages, and some are skeptical of the home-buying and flipping process during COVID-19.

 

“We’re trying to navigate it to make things happen,” she said. People are ready to buy and move but we have a shortage of houses that people are flipping.”

 

Local real estate investor Azikiwe Johnson, owner of Detroit Real Estate Man, said the market is awesome in Detroit with “a lot of opportunities.”

 

He said that flipping can make someone a profit that can range from $25,000 to $100,000 or 20 percent of the sales price or compensation.

 

Michelle Renee Swain, real estate broker with her own Detroit company, House of Real Estate, said that the current market is great for sellers.

 

“So, anyone able to pick up a property for a great price and flip it is in a great position,” she said, adding that people need to “know the neighborhoods” when it comes to flipping.

 

“While any area has potential, you need to know how desirable a certain area is,” Swain said. “Also, you need a good team of people to do the work, that is probably the most challenging aspect of flipping. Finding and keeping good contractors is what I hear most of my investors complain about,” she said. “Finally, finding deals that have profit potential is getting more difficult. There are many homes on the market with non-performing tenants. Investors are reluctant to buy these properties because they don’t want to deal with the costs of eviction. If investors can come up with a game plan for these properties there are many to choose from.”

 

Swain added that more Black people are coming into the business to flip.

 

“People from other states and other countries see our homes and are in awe at the price points,” she said. “I think we are more critical and skeptical than outsiders when it comes to Detroit. I notice a lot of local investors I run into are women. I have quite a few Black women who have been buying and flipping homes.”

 

She added that on a typical house in Detroit a flipper can expect to see $10,000 to $25,000 profit easily.

 

“I think someone deciding to flip houses in Detroit needs to take into consideration the market for mortgages in Detroit,” Swain said. “Many buyers have some credit issues or are low on down payment and closing costs funds. If you can offer land contracts for those who are not ready to get a mortgage and offer to help with closing costs for those who are approved for mortgages you will be really successful.”

 

Amoz Israel of Detroit-based Kingdom Properties which purchases and flips homes said that house flippers who are experienced in the field have not been “deterred” by the increase in home prices.

 

“However, many foreigners have invaded the market over the past several years making it more difficult for local Black entrepreneurs,” he said, echoing earlier thoughts.

Israel added that his company was shut down for several months during summer 2020 and only fully restarted operations in early 2021.

 

“The competition is fierce,” he said. “There are investors coming from as far as Australia, France, China and other countries with deep pockets who are buying up everything in sight.”

 

Israel added newbies in the housing game should beware.

 

“There are some really good flipping coaches out here, but be selective,” Israel said. “With a good flipping strategy, you shouldn’t have less than a 20 percent ROI.”

 

 

 

 

 

 

 

From the Web

X