Is Philadelphia the Next “Pot of Gold” for Real Estate Flippers

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The nationwide median price of a home is now above pre-recession levels. Available distressed properties for sale are also on the decline. Both are a signal that the U.S. economy is fairly strong. However, construction costs are higher with an increase in the price of materials and labor. This could signal trouble for real estate investors who flip houses for profit.

During the third quarter of 2017, gross profit from flipping properties fell dramatically across the country. Most investors just cannot find any affordable houses to flip. Across the country, the return on investment for flipping houses continues to fall, and the Philadelphia-area real estate market is no different. However, some data shows that Philadelphia might be a gold mine for real estate flippers.

According to recently released data, the third quarter of 2017 saw real estate flippers in Philadelphia earn nearly $96,000 in gross profit, which is a 115 percent ROI and ranks third in the nation. The data considers a flip any property an investor buys and then sells in one year or less. The average price that investors paid for a flipped property was close to $85,000. The average price that investors sold the flipped properties for was nearly $180,000.

Most of the success was attributed to Philadelphia’s supply of older housing stocks and a higher than average inventory of foreclosures. Data shows that one in 80 homes in the Philadelphia area saw some type of foreclosure proceeding in 2017. The nationwide average for foreclosures was one out of every 200 homes in 2017.

Although Philadelphia has a higher than average foreclosure rate, most regions across the nation are seeing dramatic declines in foreclosures. With rising home prices and a shortage of cheap inventory, the Philadelphia area might be the next pot of gold for real estate flippers.