Just a decade after the housing bubble burst, Atlanta is seeing an explosion of house flipping. During the first quarter alone, there was an 18.8% increase in the number of sales that — at least in appearance — looked like house flipping, making Atlanta the 9th biggest metro market, according to Attom.
Flipping can be a helpful part of a local real estate market, transforming run-down homes and drawing new consumer interest into neighborhoods. The median price paid for the 1,225 sales that appeared to be flips was $98,500, compared to the median price for all homes in February, 2017, which was $218,350.
Those figures imply that the majority of the homes sold were to people who were struggling to find homes in the increasingly competitive Atlanta market, which is currently in the midst of a housing shortage.
But flipping also carries a strong risk of damaging local communities.
A 2016 study showed that house flipping in New York increased the rate of gentrification and displaced lower-income residents by artificially inflating housing prices. That means while developers were able to make high profits, many families were forced to relocate.
“There’s a real rush to make money in our neighborhoods because you can get such a higher return here and what that’s doing is creating these false markets” Chistie Peal, executive director of the Center for NYC Neighborhoods, said to Curbed.com.
Still, many people cannot turn down the opportunity to invest. According to Better Homes and Gardens Real Estate, as many as 89% of investors are interested in real estate opportunities. And one of the quickest ways to get a return on investment is flipping.
Flipping is defined as the attempt to make a quick profit on a home, and often requires a great deal of what is called sweat equity, a term for the amount of effort that goes into the renovations. From tearing down walls to create an open concept to remodeling the bathroom, these renovations can drastically boost the market value of a home. Even a minor kitchen remodel, for instance, can have a huge return on investment, up to 82.7%.
But those flipping homes don’t only renovate the interior. For many, landscaping is an essential part of the equation. In fact, Realestate.com says that a home’s value can increase by 12% simply through better landscaping.
Despite some concerns, there is the hope that, in Atlanta at least, this current resurgence of flipping homes will be safer for investors and the city at large. Because the market is being driven by the lack of available home inventory — especially for first-time buyers and people of lesser means — the current rise in flipping is considered the market correcting an imbalance.
“The recent increase in home flipping in the Atlanta area is built on a much more solid foundation than the surge in home flipping we saw in the region about 10 years ago,” Daren Blomquist, senior vice president at Attom, said, according to AJC.com. “It’s not driven by risky lending that is creating false demand.”