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Picking the Right Neighborhood for Flipping a Home

Real Estate Broker/Owner with *ROCK REALTY|Broker|Realtor|Real Estate|WI Short Sale Agent* 55387-090

Which type of neighborhood is best for flipping homes?

When looking for an investment home that you eventually intend to flip it is important to remember that the location is just as vital as the actual home.  It is feasible to earn a profit in nearly every area but certain areas make it easier on the investor.

Top Qualities

When people pick out an automobile they focus on the features that are important to them and their current lifestyle.  In a similar manner, you can consider the following neighborhood features when considering an investment property:

  • Homes that sold recently sold quickly and had strong interest
  • Declining numbers of rental properties
  • Homes at least 20 years old that will likely need significant rehab
  • Steady values or, even better, increasing values
  • Average age of homeowner is elderly; these people are potentially moving to better climates or downsizing
  • Increased number of people moving from differing areas; signifies popularity

Three Types of Areas to Examine

In order to assist you in determining where to look for the right homes, here are three types of neighborhoods to consider.

  • Rebounding areas – There are times when an older, well established neighborhood will undergo a major overhaul.  Many of the owners have made the decision to remodel the interior.  In some instances the owners may be undertaking expansive additions.
  • New housing clusters – When an area becomes popular many builders will start developing new subdivisions.  The existing homes in the immediate area could be ripe for flipping.
  • Farming region – Established real estate agents like to focus on an preferred area and call it their “farming area.”  They send out regular postcards and newsletters to the residents so that when a home comes up for sale they usually think of that agent first.  A home investor can follow a similar strategy and be the first to know of a potential home for sale at a discount.

Keeping Your Ear to the Ground

Some investors like to focus on their own zip code or a nearby area.  This makes it easier on them because they already know a bit about the location.  There is no long distance commuting to check out a potential property. Sometimes, neighbors can actually provide a good tip that leads to a purchase.  And the local gossip is usually easy to find.

However, this only makes sense if the area is holding steady or rising.  A neighborhood suffering from falling values, crime, or an imminent new highway is not a good choice, no matter how close it is.

Don't Get In Over Your Head

This should come as no surprise, but it is also important to remember your financing.  Finding a great home at a 40% or 50% discount is worthless if the home is $50,000 more than you can afford.  Always keep the price in the forefront of your mind since it is a very important piece of the elimination process. If a neighborhood is out of your price range, focus elsewhere.

Following a well-designed plan is important for almost everybody.  Building a business, planning a party and even putting together a family vacation all work more smoothly when there is a good plan in place.  Buying a home for flipping is no different.

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Michael Collins
*ROCK REALTY|Broker|Realtor|Real Estate|WI Short Sale Agent* - Janesville, WI
CDPE, SFR , Wisconsin Short Sale Specialist Realto

Thanks for the comment Paddy!

Sep 12, 2013 01:11 AM
Michael Collins
*ROCK REALTY|Broker|Realtor|Real Estate|WI Short Sale Agent* - Janesville, WI
CDPE, SFR , Wisconsin Short Sale Specialist Realto

Ron Aguilar,

There are quite a few mortgage options for new investors who want to roll their improvements into the total loan. I'm sure that makes your job a bit easier as well.... 203k etc...

Sep 12, 2013 01:12 AM
Angela & Stephen Hardiman / HouseTie.com
HouseTie.com - Spokane, WA
When first impressions count...

So true Michael, 

I've helped one of my main clients for years. He finally stopped buying the "great buy" on a busy road. Staging can only go so far. 

A decade ago I flipped several myself, and it's a stressful game to play. Your advice is spot on. Thanks for the blog, I'm looking forward to reading the others. 

Sep 12, 2013 01:28 AM
Cynthia Larsen
Cotati, CA
Independent Broker In Sonoma County, CA

I've seen some flips in some really bad locations and think ... why, why, why? You need to look for the worse house in the best neighborhood.

Sep 12, 2013 03:03 AM
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Great post Michael especially for the beginning investor or flipper.

Sep 12, 2013 03:06 AM
Beth Lester
Beth Lester Designs - Torrance, CA
Home Staging & Interior Decorating

Excellent points, Michael!  So many would-be investors get burned because they don't consider these very points.  Flipping is not for everyone!  It takes a lot of research.

Sep 12, 2013 03:28 AM
Kimo Jarrett
Cyber Properties - Huntington Beach, CA
Pro Lifestyle Solutions

Excellent post and more reasons why buyers should always invest in a Realtor.

Sep 12, 2013 03:36 AM
Michael Collins
*ROCK REALTY|Broker|Realtor|Real Estate|WI Short Sale Agent* - Janesville, WI
CDPE, SFR , Wisconsin Short Sale Specialist Realto

Thanks Angela & Stephen. On a flip you want to get top dollar. Neighborhood and location are key. A busy road can scare off most home buyers with kids.

Sep 12, 2013 03:38 AM
Michael Collins
*ROCK REALTY|Broker|Realtor|Real Estate|WI Short Sale Agent* - Janesville, WI
CDPE, SFR , Wisconsin Short Sale Specialist Realto

Cynthia, "worst house in the best neighborhood" is a great motto to go by.

Sep 12, 2013 03:39 AM
Michael Collins
*ROCK REALTY|Broker|Realtor|Real Estate|WI Short Sale Agent* - Janesville, WI
CDPE, SFR , Wisconsin Short Sale Specialist Realto

Thanks Beth and Kimo, couldn't agree more!

Sep 12, 2013 03:40 AM
Liane Thomas, Top Listing Agent
Professional Realty Services® - Corona, CA
Bringing you Home!

The hour long shows on TV do not prepare want-to-be flippers. I get several calls a week from wanna be flippers and when I ask what kind of repairs they are prepared to do, usually the answer is "carpet and paint".

Sep 12, 2013 03:47 AM
Marnie Matarese
Showing you the best of Sarasota!

Hope you don't mind if I share this great post with some of my newbie investor types.  They are gong to get in way over their heads if they don't realize so many of the points you have made.

Sep 12, 2013 04:26 AM
Michael Collins
*ROCK REALTY|Broker|Realtor|Real Estate|WI Short Sale Agent* - Janesville, WI
CDPE, SFR , Wisconsin Short Sale Specialist Realto

Marnie, of course I don't mind :) Feel free to reblog any as well.
There are 4 total posted in this series right now. 2 more are coming soon to make 6.

Home Features that Draw the Highest Price

Picking the Right Neighborhood for Flipping a Home

Accurately Estimating Repairs for a Potential Home Flip

Top Mistakes Rookies Make in Home Flipping

Sep 12, 2013 04:32 AM
Brad MacKenzie
Brad MacKenzie - Duxbury, MA
Turning Houses into Homes on the South Shore

I agree and applaud your post altogether. My view on financing is that, if you have to, you can't afford the house.  But I know there are many investors who like the leverage and are willing to take the risks. Heck, some of them get excited about taking on the risk.

Sep 12, 2013 04:59 AM
Bob Crane
Woodland Management Service / Woodland Real Estate, KW Diversified - Stevens Point, WI
Forestland Experts! 715-204-9671

Michael, congratulations on being featured in the daily drop today!

Great info on selecting an are to flip in, and I agree that the most important part is to start with a well designed plan.

Sep 12, 2013 05:24 AM
Dorte Engel
RE/MAX Leading Edge - Bowie, MD
ABC - Annapolis, Bowie, Crofton & rest of Maryland

Dear Michael,

Good thoughts. Flipping is not for the faint of heart. You can get in more trouble than it is worth.

Sep 12, 2013 05:49 AM
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F

Whenever I buy a home to flip, I always think of who the end buyer will be.  You have to keep the end buyer in mind every time you buy.  Anything smaller than a 3/2 with a garage is probably going to sell to an investor in most areas, so you have to keep that in mind.  Most investors are going to want a bargain of some sort.

Sep 12, 2013 07:18 AM
Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

Michael, this is a wonderful tutorial for investors.  Well done!

Sep 12, 2013 04:09 PM
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

There's a bit of advice that's been around forever - always choose the worst house in the best neighborhood. 

Sep 13, 2013 06:11 AM
Lynn B. Friedman CRS Atlanta, GA 404-617-6375
Atlanta Homes ODAT Realty - Love our Great City - Love our Clients! Buckhead - Midtown - Westside - Atlanta, GA
Concierge Service for Our Atlanta Sellers & Buyers

Dear Michael,

Winston's re-blog brought me to your well-written post!
Lots of information!

Have a happy day -

Nov 30, 2013 02:00 AM