Boomer’s Blog

Rehabbing your real estate investment property for a quick flip in today’s changing markets is a totally different game than it was during the housing boom. Nationwide, returns on major home-improvement projects are fetching only 70 cents on the dollar. That’s down from 80 cents in 2004, and likely to drop even lover in the next couple of years. Remodeling activity peaked in 2006 and started slowing last year. It is expected to fall 4.8% this year, according to a report by the Harvard Joint Center for Housing Studies released last month.

The Wall Street Journal reports that despite slumping home values, construction prices have soared — due in large part to rising fuel costs and the credit crunch. That means rehabbing a kitchen or bathroom will cost more, even as it contributes less to the home resale value. Minor fixes are the the most cost-effective and on-trend strategies to entice buyers without breaking the bank. In many markets, the following fast and cheap fix-ups are your best bet for cashing in on your flip:

1. Sometimes a deep cleaning packs the punch of a remodel;
2. Replacing old siding and painting trims provides a low-cost fresh look;
3. Changing out old light switch plates and electrical outlet covers can make old walls appear new again;
4. New hardware on drawers and cabinets adds a unified style element that buyers love;
5. Cleaning up the grounds and minor landscaping, including a few well-placed, drought-tolerant plants, can make a property look like it is loved with little maintenance; and
6. Installing energy-efficient windows provides great ROI in virtually every market.

An awesome, free resource to track which fix-ups will maximize your rehabbing return on investment (ROI), Remodeling magazine has a free online database that helps you do your homework before the bills start rolling in. Here, you can check out which remodeling trends pay-off most and quickly access relevant U.S. Census data at the regional, state and extended metropolitan local levels. This is a useful and easy-to-use tool for investors who are rehabbing flips in distant and home markets.

Despite ongoing troubles in the U.S. housing market, some areas post green lights for investors looking for relatively high and fast price gains in the next year. According to Money magazine, these markets have what it takes to make for solid real estate investments (REI). (Additional data provided by Wikipedia and the U.S. Census Bureau.)

1. McAllen, Texas:

• U.S. Census data for 2003 estimated the city’s population to be 116,500.
• 12-month forecast: 4 percent
• Median home price: $109,000
• One-year price change: 2.1 percent
• Five-year price change: 23.3 percent
• Change in foreclosure rate: 23 percent

2. Rochester, N.Y.

• U.S. Census data for 2003 estimated the city’s population to be 216,000.
• 12-month forecast: 2.7 percent
• Median home price: $121,000
• One year price change: 3.4 percent
• Five year price change: 20.1 percent
• Change in foreclosure rate: 5 percent

3. Birmingham, Ala.:

• U.S. Census data for 2003 estimated the city’s population to be 236,600.
• 12-month forecast: 2.7 percent
• Median home price: $156,000
• One year price change: 2.9 percent
• Five year price change: 29.4 percent
• Change in foreclosure rate: 20 percent

4. Syracuse, N.Y.:

• U.S. Census data for 2003 estimated the city’s population to be 144,000.
• 12-month forecast: 2.6 percent
• Median home price: $126,000
• One year price change: 0.8 percent
• Five year price change: 29.5 percent
• Change in foreclosure rate: 27 percent

5. Buffalo and Niagara Falls, N.Y.:

• U.S. Census data for 2003 estimated Buffalo’s population to be 285,000; Niagara Falls to be 54,000.
• 12-month forecast: 2.4 percent
• Median home price: $105,000
• One year price change: 1.6 percent
• Five year price change: 24.5 percent
• Change in foreclosure rate: 14 percent

6. New Orleans, La.:

• U.S. Census data for 2003 estimated the population to be 469,000.
• 12-month forecast: 2.2 percent
• Median home price: $158,000
• One year price change: 1 percent
• Five year price change: 43.7 percent
• Change in foreclosure rate: 49 percent

7. Scranton, Pa.:

• U.S. Census data for 2003 estimated the population to be 74,300.
• 12-month forecast: 2.2 percent
• Median home price: $128,000
• One year price change: 7.2 percent
• Five year price change: 41.1 percent
• Change in foreclosure rate: 8 percent

8. Grand Rapids, Mich.:

• U.S. Census data for 2003 estimated the population to be 195,600.
• 12-month forecast: 1.9 percent
• Median home price: $124,000
• One year price change: -3 percent
• Five year price change: 8.3 percent
• Change in foreclosure rate: 37 percent

9. Baton Rouge, La.:

• U.S. Census data for 2003 estimated the population to be 225,100.
• 12-month forecast: 1.9 percent
• Median home price: $170,000
• One year price change: 5.7 percent
• Five year price change: 38.3 percent
• Change in foreclosure rate: 14 percent

10. El Paso, Texas:

• U.S. Census data for 2003 estimated the population to be 584,100.
• 12-month forecast: 1.8 percent
• Median home price: $134,000
• One year price change: 6.9 percent
• Five year price change: 51.9 percent
• Change in foreclosure rate: 32 percent