A recent wave of HGTV home flipping shows across Texas has fueled a 3% growth in home flipping nationwide. One area where the real estate market has particularly surged is in El Paso, Texas. El Paso enjoys a high quality of life and was cited as one the best cities to live by a U.S. News and World Report study.
Whats so exciting about El Paso is that its one of the fastest growing cities in the nation while ranking as one of the cheapest cities for renters. The average price for a home in the El Paso area hovers around $150,000, more than $100,000 less than the national average.
This has created a unique opportunity for home flippers and fixer uppers to exploit El Pasos bustling real estate market. According to a study by the finance site Wallethub, El Paso was rated the number one city in the country to flip houses. The results were based on 22 factors, including market potential, average purchase price, and remodeling costs.
Nationwide, home flipping has reached a 10 year high and completely rebounded since the 2008 housing collapse. Unfortunately, with stricter credit standards, tighter money lending, and more financial regulations, home ownership remains low. But this phenomenon cant be entirely attributed to financial regulations as supply remains scant in meeting the demand of the market.
This has inevitably led to overvaluation in the market as many people bid on existing inventory. In El Paso, the greatest growth in real estate value actually occurred in already established areas, such as Cielo Vista and Five Points. These properties sit in a good location, close to commercial zones within the city limits.
When choosing homes for sale in El Paso, evaluate these factors for flipping:
Time to hold
Market variables (job growth, population growth, etc.)
In terms of evaluating opportunity costs, a buy-and-hold strategy might not be as profitable in an open market like El Paso with low rent prices and fast rising real estate value. Ideally, the best home flippers strike when the market is prime for valuation. You need to research fast rising neighborhoods and find houses with low renovation costs and low asking prices.
The number one tip I can provide is renovating a house thats mirrored on the adjustments of highly priced comparables. Dont renovate based on your personal tastes or over-improve a house to simply raise its value. Stick with simple improvements like marble countertops and installing new faucets.
Have a contractor on hand you can trust. Sometimes cheap contractors cost more in the long-run by failing to meet deadlines and adding more hassle than help.
Youll need to have access to a hard money lender to balance your portfolio and cushion it against risk. Dont forget the added costs of purchasing a house, such as property taxes, mortgage payments, interest rates, and closing costs. One downside to home flipping is that your capital gains on a sale will be taxed, on top of all the taxes youre already paying for the transfer and original purchase.
Fortunately, Texas has lower taxes than most states and offers financial incentives for home purchases. Dont ignore growing areas on the fringes of El paso as they might be just as profitable as established areas closer to downtown.
In a competitive and growing market like El Paso, home flipping could become more than a side hustle. With a little luck and research, real estate could become your primary profession and lead you to an early retirement in the El Paso area.