Real estate investors who want to build up a strong investment portfolio always keep an eye out for hot markets, which gives them a chance to pick up properties that add to their portfolio value.
A word of caution about hot markets is that if you learn about them after they are already hot, you may have missed much of the run-up that made them hot.
Clever real estate investors try to anticipate markets that will heat up before they do, so they can buy properties in advance of increasing values. Selling properties in a hot market is how they capture profits.
The Hot Markets
Realtor.com® identified seven markets in the United States that are currently hot markets for flipping houses. The average gross profit for house flippers is $62,700. This figure does not include the cost of making the repairs. The gross profit equals about 20% to 33% of the home’s sales price after making the repairs.
An evaluation looking for hot markets for flipping homes considered the percentage of home sales that were investment properties.
The current hot markets, in the order of activity, are:
- St. Louis, MO – 18.8% of home sales are investment properties. The median sales price is $189,900.
- Birmingham, AL – 17.3% of home sales are investment properties. The median sales price is $190,000.
- Miami, FL – 17% of home sales are investment properties. The median sales price is $299,900.
- Tampa, FL – 16.2% of home sales are investment properties. The median sales price is $230,000.
- Memphis, TN – 16.1% of home sales are investment properties. The median sales price is $206,300.
- Las Vegas, NV – 15.7% of home sales are investment properties. The median sales price is $301,800.
- Phoenix, AZ – 15.1% of home sales are investment properties. The median sales price is $275,800.
Hot Pockets In Cooler Markets
Another way to find opportunities is to know your local market very well and look for areas that are up and coming. Look for a fixer-upper in a decent area. Also, search in areas that are adjacent to high-priced areas.
Look for soft barriers that can be passed easily, such as a block that is improving, which is next to another block that has already improved. Hard barriers, such as a wide street, a freeway, or a river make it more challenging for an improving neighborhood trend to pass across them.
Summary
Finding a hot market or a hot pocket comes from investigating potential growth areas and watching them. Get a feel for the trends. One strategy is to buy early when the prices are still low, rent the property for a while, and then sell later, once the market heats up.
If you are in the market for a new home or interested in refinancing your current property, be sure to consult with your trusted home mortgage professional.
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About the Author:
Babak Moghaddam graduated from University of Southern California in 1985. He entered the mortgage industry as a compliance auditor at the Bank of New York in 1986 and completed his masters in Business Administration two years later. After seventeen years in the traditional mortgage banking world Babak finally transformed this vision into his own practice in 2002 when he formed Charter Pacific Lending Corp, a mortgage company that has provided over $900 Million in residential real estate loans throughout Southern California. Babak and his team do things a little differently than other mortgage providers. They work as financial advisors, because they have come to realize that a mortgage is a very powerful financial tool. And just like any other financial tool, it should be managed as part of the overall financial management plan to reach every home owner’s long and short-term financial goals much faster. You can contact Babak for a free consultation and strategy session at (800) 322-1217 X103.