2017 was a very profitable year to be a house flipper in Durham.
The Bull City gave flippers the highest return on investment of any city in the Triangle area last year, according to a new analysis by ATTOM Data Solutions, a California-based real estate data company.
According to the analysis, four of the Triangle’s top five most profitable ZIP codes for house flipping — in terms of gross return on investment — were in Durham. No ZIP code in Raleigh made the top 10.
Gross return on investment does not include costs such as renovation material and labor.
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It’s more evidence that Durham’s growing economy and relative affordability compared to Chapel Hill and Raleigh is stoking a red-hot housing market and attracting investment.
For its analysis, ATTOM considered a house flip a property that sold for a second time in a 12-month period. ATTOM doesn’t include sales that are transferred to a family member or properties that were taken over by a bank.
The 27707 ZIP code — located southwest of downtown Durham — had the best gross return on investment in the Triangle. The gross return on investment in that area was more than 110 percent.
The other Durham ZIP codes in the top five were 27704 in northeast Durham (92.6 percent average return on investment), 27701 around the downtown area (79.3 percent) and 27703 in east Durham (77.6 percent).
The other ZIP code in the top five was in the town of Louisburg in Franklin County. But that town only saw a total of 10 flips last year, while the top Durham ZIPs all had more than 30.
After peaking before the recession last decade, property flipping — an activity that dominates home improvement shows on HGTV — has slowly made a comeback across the United States.
Last year saw an 11-year high in the number of flips in the U.S., fueled in part by a recovering economy and a lack of new construction, said Daren Blomquist, ATTOM’s senior vice president of communications
The number of flips in the Triangle was below the national average, but the high returns in Durham were causing flippers to flock to the city. Blomquist added it typically takes a 35 percent gross return on investment to break even and the national average return is around 50 percent.
The competitive housing market in Durham, in which multiple buyers are bidding on most properties, could be fueling the returns that flippers are seeing.
House flipping was most intense in 27704 and 27701, where flipping made up more than 10 percent of the total home sales in the ZIP code. The 10 percent flipping rate is a significant threshold, Blomquist said.
“A lot of times when you see a high rate of house flipping — anything above 10 percent is a high rate of flipping — that is typically an indication of a neighborhood that is gentrifying and changing,” he said. “It means there is a lot of interest in that neighborhood, and people are going in and fixing homes and selling them.”
The intensity of that level of flipping, Blomquist warned, could potentially have some negative ramifications for some neighborhoods.
“It can be a double-edged sword,” Blomquist said of home flipping. “It can really improve the quality of a neighborhood, but when you see a lot of home flipping it can overheat and overvalue a neighborhood. … If one out of 10 (sales) is a flip, which is a home that is accelerating in value in a short time, that can be dangerous for those that live there already and may struggle to afford those increases."
Where flippers are seeing the highest returns on flipping in the Triangle
- 27707 — Durham (2017 Gross ROI: 110.7 percent)
- 27704 — Durham (92.6 percent)
- 27549 — Louisburg (82.8 percent)
- 27701 — Durham (79.3 percent)
- 27703 — Durham (77.6 percent)
- 27576 — Selma (77.1 percent)
- 27596 — Youngsville (69.3 percent)
- 27513 — Cary (66.6 percent)
- 27705 — Durham (66.1 percent)
- 27577 — Smithfield (63.9 percent)