House flipping makes strong comeback in NE Tenn; ROI for Greene Co. 4 times greater than national average


 

Greene Co. house flippers raked in an average gross return on profit four times higher than the national average last year. It and five other area county markets also saw the popularity of flipping increase the same way it did across the nation.

Carter and Green counties saw flipped homes as a share of total homes sales exceed the national average, but in real numbers, most of the activity was in the region’s two largest markets – Sullivan and Washington counties.

Unicoi and Hawkins counties were the exceptions to the upswing outlined by RealtyTrac’s Year-End and Q4 House Flipping Report.

RealtyTrac’s report shows 179,778 single-family homes were flipped last year, 5.5% of all sales.

There were 384 flips in the region. That’s an 8.1% share of the total number of single-family home and condo sales reported the Northeast Tennessee Association of Realtors last year. The number of flips, share of total sales and change from the 2014 total were:

  • Carter Co. – 47, 8.2%, up 54%
  • Greene Co. – 61 – 6.8%, up 24%
  • Hawkins Co. – 30 – 4.5%, down 12%
  • Johnson Co. – 9, 4.5%, up 38%
  • Sullivan Co. – 119, 4.9%, up 14%
  • Unicoi – 7, 3.2%, down 45%
  • Washington Co. – 119, 5.1%, up 5%

For the report, a home flip is defined as a property that is sold in an arms-length sale for the second time within a 12-month period based on publicly recorded sales deed data collected by RealtyTrac (see full methodology below).

“As confidence in the housing recovery spreads, more real estate investors and would-be real estate investors are hopping on the home flipping bandwagon,” said Daren Blomquist, senior vice president at RealtyTrac. “Not only is the share of home flips on the rise again, but we also see the flipping trend trickling down to smaller investors who are completing fewer flips per year. The total number of investors who completed at least one flip in 2015 was at the highest level since 2007, and the number of flips per investor was at the lowest level since 2008.”

“More inexperienced home flippers with a smaller financial cushion could be a sign of an over-speculative market, but the data indicates that flippers in 2015 continued to operate within relatively conservative margins,” Blomquist continued. “Homes flipped in 2015 were on average purchased at a 26 percent discount below estimated market value and re-sold by the flipper at a 5 percent premium above estimated market value.”

Average gross flipping profit

Homes flipped in 2015 yielded an average gross profit of $55,000 nationwide. The average gross flipping profit is the difference between the purchase price and the flipped price (not including rehab costs and other expenses incurred, which flipping experts estimate typically run between 20% and 33%t of the property’s after repair value).

None of the local markets hit the national average gross profit level. Here’s a drill down on the 2015 average median purchase price flippers paid and gross profit for local home flips.

  • Carter – $44,000, $39,000.
  • Greene – $24,350, $44,225.
  • Hawkins – $39,822, $24,928
  • Johnson – $45,000, $12,900
  • Sullivan – $60,0000, $32,000
  • Unicoi – $23,300, minus-$3,300
  • Washington – $75,000, $40,000

Average gross return on profit

The average gross flipping profit of $55,000 in 2015 represented an average gross return on investment (ROI) of 45.8%, up from 44.2% in 2014.

Five of the seven local markets had a higher gross return on investment than the national average. Here’s what they looked like compared to the 2014 ROI.

  • Carter – 88.6%, 58.1%
  • Greene – 181.6%, 170%
  • Hawkins – 62.6%, 1,277%
  • Johnson – 28.7%, 0%
  • Sullivan – 53.3%, 100%
  • Unicoi – 14.2%, -119%
  • Washington – 53.3%, 41.1%.

The average gross ROI is the gross profit expressed as a percentage of the original purchase price.

Report methodology

RealtyTrac analyzed sales deed data and automated valuation data for this report. A single family home or condo flip was any transaction that occurred in the second quarter where a previous sale on the same property had occurred within the last 12 months. Average gross profit was calculated by subtracting the average price for the first sale (purchase) from the average price of the second sale (flip). Average gross return on investment was calculated by dividing the average gross profit by the first sale (purchase) price.

 

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