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“Petworth top neighborhood [Brookland 3rd] for home flipping in the nation”

by Prince Of Petworth June 19, 2014 at 11:25 am 48 Comments

flipped_house_neighborhoods

From an email:

“Redfin released an analysis today about flipped houses in major markets and found that DC had several of the hottest neighborhoods for home flipping in the country last year. Petworth ranked #1 in the country with average gain of $312,400 per flip. Brookland/Catholic University ranked 3rd with an average gain of $271,900 per flip. Fort Totten and Stadium Armory ranked #6 and #7 respectively. This gain is the difference in value between purchase price and sale price for homes bought and sold within a year; it does not factor in remodeling or other costs.

In our metro, the average gain for a flipped home was $104,100 in 2013. Last year 4,260 homes were flipped in the DC metro – according to our analysis of MLS data – with a median flip time of 172 days. And 73.2 percent of these homes were flipped for a gain. The analysis shows that our market continues to see high levels of flipping activity this year.”

  • HaileUnlikely

    This makes me even more grateful for the Fannie Mae HomePath program, through which they sell distressed properties preferentially to owner-occupants. (They only accept offers from owner-occupants for the first two weeks on the market, after which they allow investors to bid if it hasn’t sold already.) I bought a massively f*cked up house about 2 years ago for a little under $300K and fixed it up myself for about $60K. Flips down the street from me have been sold to investors without even having been listed and then put on the market for $600K-$800K a few months later. Can’t compete with that.

    • dunning-kruger

      I did the same, would have had no chance if not for that.

  • SPS

    Sounds like an astounding profit until you realize you have to factor in the renovation and carrying costs.

    • Part-time Flipper

      Typical renovations are about $90-100k for a full gut renovation with an open floor plan w/ half-bath on first floor with stainless and granite, 3 bedrooms 2 baths on second floor, and an open basement with a bath. Carrying costs vary, but really aren’t that significant over 6 months or so, even with hard money loans.

      • jessicae223

        $90,000-$100,000 is a very low renovation budget considering the costs of opening the floorplan, moving walls, replacing electric, plumbing, etc. Often basements need to be excavated, windows increased in size. In my experiences the renovation budget starts around $150,000 and can easily exceed $200,000 for amount of work needed to turn a $300,000 rowhouse into one that will sell for $650,000. The profits are not as big as they might seem…

        • Anonymous

          Jessica – are you a developer, or a home owner doing your own renovations? I’ve seen discussions on here before where developers talked about how they could do all of the above in the 100ish range for a typical Petworth rowhouse, as they have the labor and resources to do it rapidly.

        • Part-time Flipper

          “In my experiences”

          Not sure what your experience is, but I’ve flipped a few, and 90-100k is about right for a DC rowhouse- from demo/gut to final finish work for move-in. Of course, if you elect to do more that the standard work (e.g.: roof top deck, additional floor, etc.), it’ll cost more. But, generally, a renovation of a two-floor rowhome is about $90-100k and lasts 2-6 months.

          If your “experiences” are based on piece meal small-project work in your own home with retail contractor rates, the cost is gonna be higher.

  • brookland_rez

    Flipping activity has definitely been on the rise in the past year in Brookland. I’m happy for it. The flippers have turned several eyesores into neighborhood gems. I have a few other houses in mind that I wish someone would get a hold of and flip.

    • Frank Underwood

      Agree! Same in Petworth. Bring on the flips!

      • Anonymous

        Agree too! Two doors down from is a boarded up shit hole, rats trash the whole nine yards. the owners were up to date on the blighted tax too. I never understood the point of hanging onto to this place and paying 30k in taxes on. two weeks ago though the owner had some contractors over there to get a quote and they are finally ready to sell. Im very excited. I know flipping can drive up housing costs and lock out owner occupants from the market but for those of us who have to live with these blighted nuisance properties its really a huge relief.

    • Anon

      I do not totally disagree with you, but I’m a potential home-buyer who was hoping to buy in Petworth/Brookland. I set a goal a few years ago to save up for a down payment, intending to buy an eyesore and fix it up for myself (by the end of 2014). Now I can’t do that because of all the flipping. Homes are twice what I had originally budgeted for. I still hope to find one I can fix up myself, but I’m increasingly coming to grips with the reality I may have to move outside the city. Plus wouldn’t it be nice to see someone move into an eyesore and fix it up in their own way rather than in a general, people-pleasing way? That would be way more interesting. Let us regular folks get a chance to pretty up your neighborhood.

      • Anonymous

        still plenty of eyesore properties in need to fixing up east of the river. Finds can be had in southwest on occasion, too. Most SW renos that I know of are done by neighborhood residents looking to add an investment property or two. Obviously, SW has only a small number of homes, so when one does come onto the market, it tends to get snatched up quickly. But for the moment, it appears that the flippers aren’t buying up property in the little quadrant.

      • brookland_rez

        Sounds like a market timing issue. I was in the same position when I got here in 2004. I chose to wait for the dip. Took until 2009. You can either wait for the next market dip or buy in a more affordable neighborhood east of the river. Of course, there’s no guarantee that on the next dip you’ll be able to afford Brookland/Petworth, depending on how much the market goes up/comes down in this cycle. And buying in the next up and coming area east of the river, there’s no guarantee you won’t be underwater for a while if the dip happens sooner than expected or the dip is greater than expected. You just have to do your research and hope for the best.

      • anonymous

        There are still some available north and west of Brookland. Try Michigan Park, North Michigan Park, Ft. Totten, Brentwood, Woodridge…

      • Anonymous

        Come to Ft Totten

        • the totten.

          Shhhhhh! it’s a secret!

  • dat

    I wonder how renovation costs here in Petworth compare to other areas. It seems like a large portion of the renovation budget in Petworth rowhouses goes towards building a rear addition (or fixing what was there), adding a pop-up, and/or digging out the basement. Each one of these items can easily run 50-100k.

  • Accountering

    I could have told you this… There is WAYYY too much arbitrage in Petworth right now. I have no clue how shells are still selling for $300,000, when flipped houses are exceeding $600,000.

    I think a lot of people hate these, but the best flips are the ones where the police are finally able to clean out a drug house, and get the tenants out of there. The former landlord then sells, and they gut the place, and a new family moves in. Goes from the worst house on the block, to the best house on the block.

    • brookland_rez

      My house was one of those houses before I bought it. I renovated it myself though.

    • dat

      We have one of those (more or less) on our block. Asking price is CRAZY… but the house looks incredible.

    • MAR

      My next door neighbor in Brookland is vacant (held up in probate), I desperately want it sold so their unkempt backyard can stop taking over mine. I am fighting a losing battle against these terrible tree weeds that are rooted in their property.

      • brookland_rez

        My next door neighbor was held up in probate like that for two years. I got tired of it being unkempt and went over and mowed the lawn myself. Small price to pay for taking care of blight.

        • MAR

          Thats the thing…they pay someone to mow the grass its just this ginormous tree thing that is literally engulfing the rear of both our yards…I’ve tried pepco (there are overhead wires involved), 311…I would call a company to come remove it but alas its not my property :(.

          • brookland_rez

            If it’s that much of an issue, I would just do it. It’s easier to get repentance than permission. But that’s me. Do what you are comfortable doing.

    • Anonymous

      Hate to say it but near-shells are now selling for 400-500.

      • Accountering

        Fair… I own in Brightwood, so look at those shells/renovated houses more regularly. Thats why I said 300K for shell and 600K for renovated.

        Closer to the metro, it may well be 400-500, but they then sell for 700-800 :)

  • Pworthian

    Anyone who suggests an entire house can be gut renovated for $100,000 — even cheaply — has never done a renovation before. Even if you have the benefit of professional discounts and your own crew, a $350k house in Petworth is going to require new plumbing, electrical, insulation, largely new drywall, flooring and roof replacement or repairs, and that’s before you spend anything on the surface stuff like kitchens and bathrooms.

    I know everyone wants to be jealous of greedy flippers — and it’s not how I’d want to make my living — but let’s be realistic about what’s involved in renovating a house.

    • JRL

      The email said that the average flip in the area sold for $104,000 more than it was purchased for. So someone has figured out how to do those renovations for less than $100k.

      • power of flight

        probably economy of scale

      • Anonymous

        Doesn’t mean that they did a full gut-rehab with all new systems. I would presume that the study identified homes based purely on sales data – (homes purchased and then resold in a short period of time) – and has nothing to do with the actual amount of work done to improve the house.

        • HaileUnlikely

          I suspect that many of the flips, not all of them but indeed many, were done on the cheap with the goal of looking nice and shiny while minimizing cost. I wouldn’t count on flippers replacing a roof or adding insulation in a market where they know that they’ll easily find a buyer who will waive any home inspection contingency. Sure, some do a good job, but in all seriousness, many don’t.

          • brookland_rez

            I agree with this. A lot of flipped houses are done on the cheap. I still contend that a flipped house, even if done on the cheap, is still better than a blighted one. More than anything it brings a new owner in who will fix what isn’t done right. Which is why it is important to get a home inspection (even if the competitive market won’t let you use it as a contingency), just so you know what you’re getting into.

    • Anonymous

      Yeah this $100,000 estimate is hilarious unless the work is super, super shoddy. I just spent about $300,000 gut renovating my house in Bloomingdale.

    • Part-time Flipper

      If you’re a homeowner hiring a general contractor to do the work on your own home, you’re going to pay retail rates for the work. Investors typically have a team of people with whom they’ve worked in the past and get much better rates for pretty much everything. Another cost savings comes from gutting the interior prior to starting other work- it’s a lot easier and cheaper to replace electric, plumbing, HVAC, etc. when everything is open an accessible. Otherwise, you’ll easily pay double or triple.

      I’ve done a number of full-home renovations for $100k, and it’s always been above-board, licensed, and good quality.

  • hma

    Good.

    A flipped house is better than an abandoned house. My block is in the process of getting it’s 3rd flip this year.

  • Anonymous

    Flip flip, hooray!

  • SF

    Flips are a double edged sword. Sure a flipped house is better than a blighted property– but the real estate market and associated mortgage structures that make flipping possible are, in my opinion, not good in the long run. Most of these houses are not really worth anywhere near what people are paying for them (yeah yeah, market rate– except the market rate is entirely propped up by ludicrous government guarantees, tax breaks, and shady appraisal and lending practices [YES, STILL]).

    Not to mention most flips are godawful with materials that will need to be replaced in 10 years. Overall it’s an unsustainable practice that benefits few and makes it very difficult for people who just want basic, livable housing in DC.

    But yes, these things aside, it’s a positive economic indicator for the neighborhood.

    • dat

      specifically, what government guarantees and tax breaks are you referring to? I don’t see either of those items coming into play with respect to petworth flips.

      • SF

        I’m referring to government backing of loans, making lenders far less wary of lending insane amounts for shoddily constructed, astronomically priced homes. For tax breaks, I’m talking specifically about the home mortgage interest deduction, which effectively subsidizes home ownership, provides further fuel to an already insane housing market in DC, and helps artificially drive up prices. IMO there’s far too much government support in the housing market right now to be sure the prices are justified, especially for some of the shoddier flips.

    • textdoc

      Agreed on many counts. I have some reservations, but overall, I think flips are a good thing, as long as no pop-ups are involved.

    • Administrator

      The Redfin article actually goes into this slightly. The number of flips now is far less than the 2005 peak because we have stricter lending now. In 2005 amateur flippers were buying things with zero down, but now flipping is done by professionals (who will still do things as cheaply as possible IMO).

  • bruno

    Is house fipping a good way to spend your life? I just don’t get it.

    • Accountering

      Is being an accountant a good way to spend a life?

      That’s the tremendous thing about America. People get to (for the most part) choose how they want to spend their life.

      • Administrator

        +1. Maybe bruno is independently rich. Making money is the way I have to spend 50 hours a week. Small time developers/house flippers are in the same boat.

  • BLand

    Go talk to any one who bought one of those flipped houses. $100,000 flip is spot on. There a few good ones in Brookland, the gentleman who did the round house comes to mind but most of them, know from personal experience, have little to no knowledge of construction and are just there because of the easy money. Examples, drive through Brookland and look at any of the flipped house who have a Stucco front façade (looks like something you would do in Florida). Very poor flips. I just moved out of Brookland and definitely took advantage of the rising home prices, but I could have never bought the rundown home and fixed it myself over the past years in todays market. My great 100 year old home would have been gutted made into an “open floor plan… yuk” 200 dollar stainless appliances, and hideous granite would now be there! DC is crazy.

  • Anonymous

    Go talk to any one who bought one of those flipped houses. $100,000 flip is spot on. There a few good ones in Brookland, the gentleman who did the round house comes to mind but most of them, know from personal experience, have little to no knowledge of construction and are just there because of the easy money. Examples, drive through Brookland and look at any of the flipped house who have a Stucco front façade (looks like something you would do in Florida). Very poor flips. I just moved out of Brookland and definitely took advantage of the rising home prices, but I could have never bought the rundown home and fixed it myself over the past years in todays market. My great 100 year old home would have been gutted made into an “open floor plan… yuk” 200 dollar stainless appliances, and hideous granite would now be there! DC is crazy.

    • brookland_rez

      “200 dollar stainless appliances”

      $200 for any appliance sounds really cheap.

  • Anonymous

    Have you seen a standard flip 5 years later? The cheapness really shines through.

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