David and Amanda Seibert bought a beat-up cinder-block house last fall for $27,000 off North 26th Street in Church Hill.
Built in 1964, the one-story house with five rooms is described as “very poor for age” by the Richmond assessor’s office.
The Seiberts gutted the house and hope to have the rebuilt and re-engineered house back on the market for $179,900 in three to four months.
“In the 10 years I have been here, Richmond has been a great place to flip houses,” said David Seibert, co-owner of Nest Builders Development Co. and a real estate agent with Long and Foster Realtors.
A total of 1,114 houses were flipped in the Richmond area in 2016, hitting a 10-year high, according to a report released Thursday by Attom Data Solution, a real estate research and data firm in Irvine, Calif.
The peak here was reached in 2005, when 1,784 houses were sold for the second time within a 12-month period.
Last year’s flips represented 6.9 percent of all single-family and condo sales in the Richmond area, up 7.2 percent from the previous year.
The median purchase price, with half the houses costing more and half less, was $113,550. The median flipped price was $186,000, representing a gross profit of $72,450, not including the cost of renovations or other expenses.
The number of flips here was similar to the nation, which also saw a 10-year high last year.
“One thing that stands out here is with a gross profit of more than $72,000, that is above the national average of $62,624,” said Daren Blomquist, senior vice president of Attom Data Solutions.
“A 64 percent return on investment for a home flip in Richmond compares with 48 percent for the nation,” Blomquist said. “On both counts (gross profit and return on investment), flippers in Richmond make more money on average than nationally.”
“Richmond-area investors are able to find better deals and get lower prices,” he said, adding that the median purchase price here is $13,726 lower than that for the nation.
Flippers can easily spend $20,000 to $30,000 on a renovation and, if they have trouble selling a home, expenses can increase, he said. “You need a big enough margin after a rehab and still be profitable.” A 15 percent average return on investment is not enough margin to operate on, he said.
“It’s definitely a risky business,” Blomquist said. “There is no guarantee that a flip will be profitable.”
Debbie Eldridge, a Class A contractor and owner of Floors by M.E., a flooring company in Henrico County, said the key to the business is knowing the right areas to do a flip.
“You can’t do this in a bad school district,” said Eldridge, who has done seven flips in the past 10 years. She made a mistake, partnering with another developer on a flip years ago in a questionable district and barely eked out a $500 profit.
She sold her most recent flip in one day last Sunday in a competitive bidding process.
The brick Cape Cod off West Valley Drive is in the Tuckahoe Elementary School District in Henrico.
“It was in terrible condition,” she said about the house when she bought it for $202,000 in December. The house had not been updated in years, and the kitchen was tiny with no dishwasher.
“I did everything to the house that was humanly possible,” Eldridge said.
She tore down a wall to enlarge, gut and rebuild the kitchen. She installed hardwood floors, enclosed a screened porch, rebuilt a laundry, added a butler’s pantry and a half-bath, redid two full baths, removed upstairs paneling, installed wallboard and whitewashed the exterior brick.
She put $48,000 into the house, listed it for $310,000 and — with eight competitive bids in hand, some with price escalation clauses — she has a cash offer for more than the asking price.
“We had people looking at it before we put it on the market and over 50 people at the open house,” Eldridge said.
David Seibert, who is doing the flip in Church Hill, said the flipping market in the Richmond area has changed over the years.
“Back when the market was deep in the recession, the house you wanted to flip was for first-time homebuyers who weren’t under water with another house,” owing more than their house was worth, he said.
“Interest rates were super-low, and there were tax incentives for first-time buyers. You wanted to have your flip land in the middle of the market — the average house in the neighborhood.”
Now, there’s a lot of scarcity of homes for sale, he said.
“Sellers can sell their houses for prices they feel good about, so there’s opportunity to sell flipped houses to second- and third-time homebuyers. ... People doing the best flips and making the most money are experienced people who can deliver a nice product and sell in the top range. That is the sweet spot.”
Even though the flipping market hit year-over-year highs last year, it is still on the rise, said Blomquist with Attom Data.
“We are seeing an upward trend in home flipping,” he said. “There is more confidence in general in the housing market, and there are not a lot of homes for sale, so flippers are capitalizing by fixing up inventory and providing more inventory for sale or rent.”
Flippers also benefit from the availability of more financing options in the past couple of years.
“Hopefully, there will be restraint,” said Blomquist, referring to years of out-of-control spending that contributed to the housing bubble.