Learn how to perform market research to narrow down your flip search and find your ideal flip project.
You can make money in any real estate market, but some markets are more profitable than others. When you first start your property search you want to pick a market that has strong catalysts for flipping houses.
Here is a list of catalysts to look for when performing market research:
This sounds simple, but you want to flip houses where people want to buy houses. So identify areas that people want to live that are close to amenities, have highly rated public schools & low crime.
Catalysts for a Strong House Flipping Market
#1 Fast Sales & Multiple Offers On Recently Sold Properties
Properties getting multiple offers and selling quickly are a good indicator that there is a strong demand for house in your market.
Get in touch with a local realtor to get a pulse and temperature of the hottest markets and neighborhoods. Have your realtor provide sales data such as the Average DOM (Days on Market) and typical # of offers which will help you understand how hot or cold the market is in your area.
#2 Neighborhoods with Older Homes
Neighborhoods with older homes built at least 20 years ago will require more rehab work and potentially provide a great opportunity to buy properties at a discount and add significant value by making modern improvements to the property.
#3 Neighborhoods with Older Homeowners
Neighborhoods with older homeowners tend to have houses that need to be updated and homeowners that are looking to downsize, retire or move into assisted living.
Older homeowners may have homes that haven't been updates since their original purchase or may be struggling to keep up with the physical demands of maintaining their home.
#4 Strong Population Growth
It’s very important to understand population trends in your target market. After all, the end goal of every fix-and-flip investment is the “flip” -- selling your renovated property to a new buyer. Determining whether or not there’s likely to be a willing buyer in the market is therefore crucial to your success.
Finding a buyer depends greatly on the number of potential home buyers in your area. Understanding how many people are entering or exiting your market will help you determine whether or not it’s a good time to invest. The U.S. Census Bureau offers in-depth information on population trends around the country, including a recent study on the fastest growing cities in the United States
Understanding this data will help you better gauge whether your investment property is likely to find a buyer.
#5 Strong Local Economy
A strong local ecomony that is growing steadily, with a strong jobs market, low unemployment & high wages helps convert renters into home buyers, which ultimately drives demand for housing in your market.
If your local economy is growing steadily, there is a good chance potential home buyers will be more likely to make a home purchase in the near future. However, a shrinking local economy likely means a weaker real estate market with less home sales and decreasing property values.
A related indicator is the relative economic diversity of an area. A city or region’s local economy will tend to be much stronger if it includes diverse industries, but cities that bank on one industry tend to be more vulnerable. WalletHub recently explored the most and least economically diverse economies in the country. Examining this data
could help you determine if your area is ripe for investment.
#6 Close to Amenities
Proximity to the downtown central business district, schools, parks, walking trails, restaurants, grocery stores, and nightlife are all amenities that make your properties more desirable to potential home buyers.
Drive around and explore your target markets and get a feel for the lifestyle and amenities of the neighborhoods to truly put yourself in your buyer's shoes.
#7 Good Public Schools
Neighborhoods with great public schools help attract new home buyers and families that want to provide the best education for their children.
Checkout GreatSchools.org to find ratings of local School Districts in your Area.Check out GreatSchools
#8 Low Crime
You don't want prospective home buyers to be afraid or concerned about crime issues in the area. Look up local crime statistics in your are to ensure your investing in safe neighborhoods.
to find recent local crime incidents in your area.Check out CrimeReports.com
If you are just getting started, it's best to start in a market that you are familiar with that is close to home. First start by researching your local market, and determine if it will provide a strong market for flipping. If not, move-on to greener pastures.
Narrow Down Your Search
Once you have found the ideal market to work in, narrow down your search to a few School Districts or neighborhoods in the market.
Create a Farm Area
Think of your market segment as raw farm land. You want to identify the best pieces of land to plant your crops and grow your business.
With flipping, the farm land is the neighborhoods and the crops are the houses where you will be focusing your time, marketing & investment dollars.
You want to focus on specific school districts & neighborhoods that you can nurture and grow your house flipping business.
FOCUS! Trying to focus on too large of a market will have you stretched too thin. Narrowing down your search and focusing on a specific segment of the market will help you develop a better pulse on the market, market values, competition.
Once your business starts to grow you can start to grow your farm area & expand your market reach.
Targeting Your Ideal Flip
Once you've narrowed down your market to specific segments & identified an area that you want to 'farm', you need to define the characteristics of an ideal flip. Again, you want to flip houses that people want to buy, so identify what types of homes that people are buying.
How much square footage and how many beds and baths?
Talk to your real estate agent to discuss the most in-demand property types in your market. Generally speaking, families will want a 3 bedroom home with 2 separate full bathrooms.
Sometimes properties with only 2 bedrooms & 1 bath provide an opportunity to add value by adding a bedroom or adding a bathroom, so don't necessarily limit your search to only 3 beds & 2 bathrooms.
What is the most you can pay to purchase a property & how much can you afford?
Analyze the market to determine the price you need to pay for a distressed property in order for the deal to be profitable.
How much repairs are needed?
Determine the extent of repairs that you want to take on for your rehab projects. Do you want to focus on just light cosmetic rehabs or will your niche be gut-rehabs.NEXT: How to Find house flipping deals
Once you identify specific property requirements, talk to your agent and have them setup Automatic Email notifications so you can get daily notifications of new properties that fit your criteri