Older, character-filled homes that could gain value through remodeling are frequently used as flipping properties. The 70 percent rule is very helpful because you have to submit a proposal with a built-in profit margin. A property’s ultimate value following renovation is determined by the final ARV amount.
Astute property flippers looking to profit from the nearly constant interest in New York real estate are also fond of the Empire State, which is home to some of the most iconic buildings in contemporary society.
New York is an excellent place to begin if you want to make your first real estate investment. There are plenty of cities and suburbs with steadily increasing property values, and there will always be a consistent supply of renters and buyers who are interested. Before starting the process, you should read this short guide to learn a few things about house flipping in New York.
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All About Real Estate in New York
Investors in fix-and-flip properties in New York make an average of $56,400 per sale. As a result, it appears that there is a good chance that the flip will be successful. However, you must carefully research the regional markets and keep your renovation costs in check if you want to maximize your net profit.
In this region, single-family homes are the most sought-after real estate, and the residential market is doing well. With a median local property price of $327,569, New York is one of the more expensive cities in the nation. More significantly, property prices in New York rose by 2.5 percent last year, and analysts anticipate a 3.7 percent increase in the following year.
The top five NY real estate markets are New York City, Syracuse, Buffalo, Rochester, and Albany. With this information, it might be advantageous to evaluate these areas first before moving on to cities with less activity.
2022 New York Housing Market Analysis
Where in New York you decide to flip a house will have a significant impact on how much money you’ll need to put in (and how much money you’ll make in the end).
Remember how the Big Apple skews nearly all metrics for New York State when looking at the median home values. The state’s $387,069 median home value, which has increased by nearly 14% in the last year, is the highest in the nation.
However, New York City has higher median home values than the rest of the state, at $753,782, more than twice as much. Yonkers home values have increased 9.3% in the last year to reach $634,197.
The median home value in Albany, which has increased by 12% since 2021, is $254,600, making upstate New York a more accessible market for flipping. Syracuse real estate is worth $156,467, but median home values have increased 12% in the last year and are anticipated to continue doing so.
Simple Tips for Flipping Houses in New York
When an investor buys a house with the express purpose of renovating it and reselling it for a profit, this is known as home flipping. If the investor chooses the right property and sticks to their budget, this is a profitable investment strategy with the potential to generate profits quickly and gain equity right away.
Investors in this region who are involved in property flipping either use their own money or obtain a loan from a hard money lender. Due to the risk involved and their reluctance to manage a property in the event of non-payment, banks typically do not finance this type of transaction.
Properties used for home flipping are typically older homes with character that could increase in value through remodeling. Fast loan approvals and closings are just one advantage that hard money lenders give investors. Every real estate investor should strive to adhere to the 70% rule, which instructs investors to pay only 70% of a property’s after-repair-value (ARV) without the cost of repairs added.
The 70 percent rule is extremely useful because you must send a proposal that includes a built-in profit margin. In this way, you are able to set a price that includes both a healthy profit margin and the cost of repairs. If the homeowner rejects your offer, you can immediately turn your attention to a different, better-suited opportunity to flip a house.
The final ARV amount dictates a property’s final value after the renovation has been completed. Other elements that affect a property’s value include its size, location, and the costs of nearby homes that are comparable to it. This guide goes into further detail about how to calculate ARV if you’re interested.
These kinds of real estate projects are catered to specifically by hard money lenders like New Silver, who offer interest rates and terms that fit this need.
Tips for Finding Houses to Flip in New York
Knowing that there is a high demand for properties in the area should give you some peace of mind as a real estate investor looking to flip houses in New York. Particularly among millennial buyers, who make up a large portion of the market, affordable housing is in high demand. This population makes starter homes and secondary single-family homes in high demand.
The three most crucial factors in real estate are location, location, and location, according to an old proverb. You should thoroughly investigate the performance of the nearby areas you are interested in if you want to find a good property to fix up and sell. You should research the typical price of a home, the cost of renovation, and the factors that might make a home appealing to buyers. Additionally, since these can be expensive to repair, you should stay away from homes with significant structural flaws or other needs.
Use FlipScout by New Silver
Use data and intelligence from FlipScout, a free tool, to find the most lucrative real estate investments. Anywhere in the nation, locate a property to flip or rent.
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Leverage the Power of Wholesalers
A successful wholesaler can make all the difference for a property flipper. Wholesalers frequently have distinctive personal networks and access to all the most important property databases. Utilizing a wholesaler gives you insider access to their understanding of New York City properties.
Attend Bank Auctions
Bank auctions frequently offer the chance to buy properties for less than they are worth. The primary reason for this is that banks hold these auctions in an effort to sell the properties as quickly as possible. If you go to bank auctions with a well-thought-out plan, you might leave with a new property that is a perfect fit for your investment portfolio.
Use Direct Mail to Find Off-Market Properties
Direct mail can still be effective for house flippers even though it is an outdated strategy. Studies have shown that people actually enjoy checking their mailboxes, and direct mail has been shown to have a higher response rate than email. More importantly, you might be shocked by how many people have thought about selling their homes. Their long-awaited catalyst could be your letter.
Sign Up to the Multiple Listing Service (MLS)
MLS listings are still a good place to find properties to flip despite the fact that they can be competitive. Real estate agents have literally created a database called the Multiple Listing Service (MLS), which is chock-full of information about properties and statistics that can help you with your research. There is a cost, but you only need one deal to comfortably cover everything.
Find Foreclosures
The main objective of the loan originator is to recover any potential losses when properties go into foreclosure. This is good news for real estate investors because foreclosed homes frequently sell for less than their market value. There’s a good chance you’ll be able to purchase a property for less than its market value if you can find foreclosure opportunities in New York. Foreclosure makes a great foundation for a potential flip because of this.
Ways to Fund Your House Flipping Business in New York
Flipping a house is much more expensive than buying a home that you intend to live in, even though buying, fixing, and selling it quickly can be profitable. From the day the sale closes until the day it sells, you’ll need money to pay for the house, the improvements, and homeowners insurance in addition to paying for utilities, taxes, and other costs.
If you can figure out how to finance your home-flipping business, do get rich. Let’s take a look at some of the ways to fund your setup:
Hard money lenders
Private lenders
Real estate partnership
Wholesale lenders
Even though getting financing may be straightforward, you still need to put in the time and effort to succeed. This entails becoming knowledgeable about the best properties, working with a group of professionals who specialize in affordable renovations, and thinking creatively to make the property appealing to potential new homeowners.
Finding Cheap New York Properties
You get off to a bad start by paying too much for a potential flip. Look for houses that are less expensive than other properties in the neighborhood.
Before considering including the house in your fix and flip portfolio, evaluate its current condition. No matter how reasonably priced a home is, avoid buying it if it needs significant structural repairs, like a new roof or foundation. These kinds of repairs can be more time-consuming to complete, necessitating a longer period of holding the property, which reduces your profit margin.
The best deals are typically found in houses that only require minor cosmetic work or in houses with motivated sellers. Foreclosures, pre-foreclosures, short sales, and neglected or abandoned properties are common examples of houses that are profitable to flip.
How to Analyze Deals?
Always look past your emotional reaction to a home and do the math. You might fall in love with the built-ins or imagine a fantastic entertainment area in the basement. Keep in mind that this is an investment rather than a place you intend to live.
Successful real estate investors have developed the 70% rule over time to help them make buying choices when considering flips. They’ve discovered that you have a better chance of turning a profit if you consistently pay less than 70% of the home’s ARV, which is its value after repairs, less the cost of repairs.
If a house in Albany is worth $169,500 after repairs, multiply that amount by.70 to get $118,650. You’ll have $98,650 left after taking a $20,000 estimate for repairs. You should try to pay less for the house because, in accordance with the 70% rule, that is the most you should be required to pay.
In an equation, this would be expressed as follows: $169,500 (ARV) x 0.70 = $118,650; $20,000 (repairs) = $98,650.
This is one of the first equations you ought to figure out before you even consider taking a potential property on a tour. Consider other options if you are unable to purchase a flip at a price that complies with the 70% rule.
Every investor should have return on investment, or ROI, in their toolbox as another useful ratio. It’s a percentage that indicates how much money you’ll make from investments, and if you’re taking on a lot of risk, it should be higher than how much money you’d make in the stock market. To calculate it, first determine the investment’s current value, then deduct its cost, and finally divide the sum left over by the investment’s cost.
With regard to the hypothetical house in Albany, the $169,500 price would be reduced by the $138,650 cost of the mortgage and repairs and divided by that sum for a ROI of 22%. This is just a simple illustration; remember to add realtor commissions, closing costs, and any loan payments made while you were the owner of the property to your expenses before subtracting and dividing when figuring out the actual ROI for a particular property.
Best Cities in New York for House Flippers in 2022
Looking for a place in New York to buy your first flip?
Start by focusing on Rochester. $207,009 is the median home value, and prices have increased by more than 15% in the last 12 months. Although it has the second-largest economy in the state, a first-time flipper with limited resources will find it to be the ideal city because housing costs are still within reason.
The housing market in Buffalo is booming. The average price of a home increased 18% in 2017. At $203,492, median home values are considerably less expensive than other investment options. The largest group of newcomers has been the millennial generation, who are responsible for driving housing demand as they settle down and start families.
Check out Yonkers. Despite the cost of median homes, they are still less expensive than the nearby city of New York.
Final Thoughts
Fix and flip investors in New York State can maximize their returns by using the most recent market-related data. It is regarded as one of the top locations in the country for home flipping because of this.
In the end, investing in real estate is a lucrative way to build wealth, and if investors choose their properties carefully, the NY real estate market guarantees them good returns. Investors can take advantage of this opportunity with funding from New Silver by applying online and receiving loan approval in less than 10 minutes. The local market is expected to continue expanding.
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