If you are looking for a comprehensive guide to start flipping houses in the state of Michigan, you’ve come to the right place.
One of the most effective methods to begin investing in real estate is to flip houses. It may be a successful business venture, but because it is a high-risk investment so you must evaluate a variety of factors.
But don’t worry, I am here to assist you with your research and decision-making. The market analysis, appraisal, and procedure of flipping houses in Michigan are all broken down in this comprehensive guide.
Flipping Houses in Michigan
Michigan has one of the country’s hottest housing markets. For house flippers, it presents a one-of-a-kind financial opportunity. Despite the low housing market valuation, investors who choose the correct properties and flip houses in Michigan generate a significant return on investment.
Real estate markets, like every investment, are very localized, and Michigan is no exception. Recognizing a profit or loss will include paying attention to current market developments and learning how to move promptly. You should always work with a local professional real estate agent to understand the trends in these local markets and to find investment possibilities. Their comprehensive understanding of the ins and outs of these niche housing markets will assist you at every stage of the process.
Analyzing the Michigan Housing Market in 2022
Michigan is the 11th cheapest home market in the United States. As of April 2022, Michigan’s typical house value is roughly $231,000, which is much less than the national average home value of $344,000. In addition, house values in Michigan increased by a little over 10.34 percent in 2021, and are anticipated to increase by another 16 percent in 2022. These costs, however, fluctuate even within the state, demonstrating how regional and localized the housing markets really are.
Real estate investors from all over the country have taken notice of this trend in the Michigan property market. Currently, the demand for Michigan homes outnumbers the supply. This has resulted in a strong seller’s market in Michigan’s housing market. The rationale for the influx of investors into the Michigan property market is straightforward. One of the key causes for this is the growing population and improving job and education sectors. The high school graduation rate in Michigan is 90.5% and the median household income stands at around $57,000.
Michigan is projected to add 371,000 new jobs between 2012 and 2022. With 8.7% growth, the job market is expected to increase across a number of sectors and occupational groups.
Furthermore, Michigan’s affordable housing costs make the market more accessible to newcomers. You’ll need less money to get started, which is ideal for first-time flippers looking to enter the real estate investment sector.
How to know if the house in Michigan is a good investment?
After understanding the overall housing market and economy of Michigan, you probably want to take a deeper look into a more specific locality and neighborhood to find prospective properties. Always keep in mind that not every local housing market provides similar investment opportunities.
Generally speaking, knowing if a particular property is a good investment comes down to several factors. As a general rule of thumb, while getting started always stay away from local markets with a lot of inventory and listings that have been active for a long time. On average, houses in Detroit sell after 65 days on the market. This means, that if the property is still active even after the 65-70 days mark, it is a no-go.
Another way to know if the house in Michigan is a good investment is if the price of the house is below the local market average. Looking for homes that are significantly priced below recent sales in the neighborhood is one of the best ways to identify potential value. Bear in mind that the cheaper houses require significantly more renovations compared to expensive ones.
How much should I pay for a house in Michigan?
When selecting how much to spend for a property in Michigan, it’s always a good idea to stick to the 70 percent guideline. This guideline states that you should never spend more than 70% of the house’s after-repair value, less the repair and remodeling costs. Assume you purchase a home in Michigan and intend to spend $30,000 on repairs and renovations. Bear in mind that improvements increase the property’s market worth. Now let’s assume your house’s after-repair value is $250,000.
If you stick to the 70 percent guideline, the most you should spend for this property is 70% of the after-repair value minus repair costs. When you calculate the numbers, it comes down to only $145,000.
It’s important to remember that the 70 percent rule is arbitrary. It’s merely a rough estimate of the house’s true value. The purpose of this rule is to develop a profit margin large enough to cover all other expenditures while flipping houses in Michigan and yet leave you with a healthy profit margin.
Do you need a real estate license to flip houses in Michigan?
In Michigan, you don’t need a real estate license to flip properties. Having said that, if you want to start flipping properties in Michigan full-time, getting both a realtor and a contractor license is generally a good idea.
It’s acceptable if you don’t want to deal with the difficulty of getting Michigan realtor or contractor licenses. In such a scenario, I strongly advise you to seek out an experienced realtor and contractor with whom you can have a strong working relationship.
Finally, if you are new to the area, finding a trustworthy contractor or repairman may be challenging, as local zoning restrictions and regulations vary by city, and market trends are always changing. Working with a reputable agent or contractor might help you anticipate potential issues.
How to start flipping houses in Michigan and make a profit?
You’re ready to begin your home flipping journey in Michigan once you’ve done comprehensive research on the Michigan housing market and are confident that the house is a solid investment. Follow these six steps to begin flipping houses in Michigan and benefit handsomely from this type of real estate investment.
1. Create a Budget and Secure Financing
Before you start flipping houses in Michigan, the first thing you need to think about is your funds. Prior to looking at possible properties, it’s usually a good idea to do the maths.
If you have cash on hand, you should already be aware of how much money you have. You may eliminate financing charges, mortgage payments, and any other closing costs or fees by paying cash for your Michigan house flips. As a result, if you have cash, you should always use it while flipping properties in Michigan.
Using a loan or other forms of finance for the purchase and restoration of a home might significantly reduce your prospective profits. If you took out a $200,000 loan to buy a house in Michigan, you’ll be paying mortgage payments until the house is sold. Even a 5% down payment on a property can set you back roughly $10,000. Furthermore, with $30,000 for repairs and renovations, you’ll need to invest an additional $40,000.
Repairs and improvements, unfortunately, take time. This might result in you paying your mortgage for a longer period of time and perhaps missing out on a nice profit margin. Furthermore, if you account for property taxes, building permits, utilities, marketing costs, closing fees, house insurance, realtor commissions, and other costs connected with flipping houses in Michigan, you may not be able to make a profit at all.
As a result, carrying cash can help you save money on all of these expenses and retain as much of the earnings as possible in your pocket.
But don’t panic if you don’t have any cash on hand. There are still a few other options for funding your house-flipping venture on a budget.
2. Research the Cities and Neighborhoods
After you’ve identified the homes that are listed below market value and taken into account other factors such as active days on the market, you can assess the neighborhood’s attractiveness. The quality of the neighborhood is a golden variable when flipping houses in Michigan. Although the listing and sales price are excellent indicators of the neighborhood’s value, you should also consider other quantitative factors such as the quality of education, entertainment, parks and recreations, and the neighborhood’s shopping experience.
Existing housing stock in Michigan’s older towns, as well as a growing metro region, may benefit from rehabilitation and repair. If you learn to spot the right opportunities, you can make a solid income flipping houses in Michigan.
Here is a list of the 4 best cities to flip houses in Michigan for 2022.
Flipping Houses in Detroit, MI
Detroit is the biggest city in the state of Michigan. This city is composed of 179 neighborhoods and offers multiple affordable duplexes, triplexes, and affordable multi-family homes. As of April 2022, the median listing home price in Detroit is just $80,000, trending up 6.8% year-over-year. The median listing home price per square foot is $71. The median home sold price was $84,500. The sale to list price ratio is 92.02%, which confirms means that the supply of homes is greater than the demand for homes in Detroit.
Houses in Detroit, on average, sell after 65 days on the market. The city offers 350 public schools rated good and higher by GreatSchools and also 80 private and charter schools. Detroit also offers hundreds of grocery stores, restaurants, and cafes. There are also a plethora of beautiful parks and gyms for a healthier lifestyle.
Out of the 179 neighborhoods in Detroit, Boston Edison West is the most expensive one with a median home price of $307,000. On the other hand, Farwell is the most affordable neighborhood, with a median listing home price of just around $51,000. There are also some other great neighborhoods like Morningside, Warrendale, Cornerstone Village, and Greenfield.
Flipping Houses in Grand Rapids City, MI
Grand Rapids is a city in Michigan that is composed of 28 neighborhoods and offers multiple affordable duplexes, triplexes, and affordable multi-family homes. As of April 2022, the median listing home price in Grand Rapids is $240,000, trending up 15.3% year-over-year. The median listing home price per square foot is $148.
The city offers 119 public schools rated good and higher by GreatSchools and also 44 private and charter schools. Grand Rapids also offers hundreds of grocery stores, restaurants, and cafes. There are also a plethora of beautiful parks and gyms for a healthier lifestyle.
Out of the 28 neighborhoods in Grand Rapids, Downtown Grand Rapids is the most expensive one with a median home price of $437,000. Conversely, Madison Area is the most affordable neighborhood, with a median listing home price of just around $185,000. There are also some other great neighborhoods like Garfield Park, Westside Connection, and Alger Heights.
Flipping Houses in Lansing, MI
Lansing is the capital city of Michigan. It consists of 45 neighborhoods and offers multiple affordable duplexes, triplexes, and affordable multi-family homes. As of April 2022, the median listing home price in Lansing is $125,000, trending up 6.2% year-over-year. The median listing home price per square foot is $101. The median home sold price was $139,000. The sale to list price ratio is 102%, which confirms a strong seller’s market.
On Average, houses in Lansing sell after 43 days in the market. The city offers 61 public schools rated good and higher by GreatSchools and also 13 private and charter schools. Lansing also offers hundreds of grocery stores, restaurants, and cafes. There are also a plethora of beautiful parks and gyms for a healthier lifestyle.
Of the 45 neighborhoods in Lansing, Tecumseh River is the most expensive with a median home price of $209,500. On the other hand, Baker-Donora is the most affordable neighborhood, with a median listing home price of just around $67,400. There are also some other great neighborhoods like Colonial Village, Westside Lansing, and Northtown.
Flipping Houses in Ann Arbor, MI
Ann Arbor is a city in Michigan that is composed of 42 neighborhoods and offers multiple affordable duplexes, triplexes, and affordable multi-family homes. As of April 2022, the median listing home price in Ann Arbor is $471,000, trending up 1.2% year-over-year. The median listing home price per square foot is $268. The median home sold price was $453,500. The sale to list price ratio is 103.36%, which confirms a strong seller’s market.
On Average, houses in Ann Arbor sell after 36 days in the market. The city offers 43 public schools rated good and higher by GreatSchools and also 14 private and charter schools. Ann Arbor also offers hundreds of grocery stores, restaurants, and cafes. There are also a plethora of beautiful parks and gyms for a healthier lifestyle.
Out of the 42 neighborhoods in Ann Arbor, North Central is the most expensive one with a median home price of $895,000. On the other hand, Bryant is the most affordable neighborhood, with a median listing home price of just around $205,000. There are also some other great neighborhoods like Plansmart, Southeast Ann Arbor, and Glazier Way.
3. Assemble your team
Whether you are planning to pursue flipping homes in Michigan full-time or part-time, you will need a team of individuals to make each flip successful. You’re likely going to need a real estate attorney, a lender, a real estate agent, a general contractor, a few laborers, and an accountant by your side.
Furthermore, if you intend to make house flipping a regular element of your investing strategy, it is preferable to work with a trusted team rather than a new professional for each project.
4. Select and Purchase your Michigan House
It’s finally time to buy your property in Michigan, once you’ve figured out your finances and determined whether it’s a suitable investment. One last thing to consider when purchasing a house is that properties that require more repair and care are often less expensive to buy. As a result, they will require more time to resale.
Houses that are already in excellent shape and do not require costly repairs and modifications, on the other hand, are much more expensive. Even if you spend more upfront, you will save a lot of money in the long run and don’t need to worry about renovating the house.
As a result, while buying a home in Michigan, strive to strike a compromise between these concerns. Choose a home that best fits your abilities, money, and timeline.
5. Repair and Renovate the House
You should also think about how much money the house will need to spend on modifications and repairs, as well as how long they would take. Find out which upgrades will add the most value and whether or not they will appeal to buyers. Adding air conditioning and energy-efficient upgrades to a home may quickly increase its value for homeowners who want to avoid the hot and humid Michigan summers and cold Michigan winters.
Furthermore, power washing the outside, painting the house, repairing a leaking faucet, reglazing and caulking bathtubs, and cleaning the floors are all tiny but important jobs that will help your property sell faster.
6. Resell the Renovated Michigan House for a Profit
It’s time to put the house back on the market once you’ve finished repairing and refurbishing it. There are two options for reselling your home in Michigan. Selling for sale by owner (FSBO) is the first choice while selling with the aid of a real estate agent is the second.
One of the numerous advantages of selling your home without the help of an agent is that you save money on commissions. Remember that even if you sell the Michigan house on your own, you must still pay the buyer’s agent a commission (3%). If you want to sell your property quickly, you’ll need to be prepared to bargain like a pro and accurately fill out all of the documents.
You may always employ a professional real estate agent if you don’t want to deal with the trouble of selling the property yourself. Contract preparation, discussions, signing, and closing will all be streamlined. You will, however, have to pay them a 3% commission for their services.
How much money do house flippers make in Michigan?
The average revenue per flip in the US is $60k, while in Michigan it’s just around $50k. This means the average revenue per flip in Michigan is $10k less than the national average. Therefore, you need to be extra careful while flipping houses in Michigan.
Furthermore, it is also important to understand that the revenue per flip is not the net profit. You will also need to allocate some money for repair and renovations. There may be a wide range of repairs necessary depending on the current state of the home, but let’s assume we will spend $30,000 fixing up the home. Once you deduct all these costs, you will be left with a net profit of around $10,000 to $15,000.
Thus, it is safe to assume that on average you can make around $15,000 by flipping a single house in Michigan. Furthermore, an average real estate investor flips around 5 houses per year. That means you can expect to make around $75,000 per year flipping houses in Michigan full-time.
Overall, flipping houses in Michigan is an excellent method to begin investing in real estate. While Michigan isn’t the most profitable state for flipping houses, it is fast expanding and has much to offer residents of the Great Lake State. Furthermore, discovering lucrative flips in Michigan is a combination of your abilities, expertise, and chance. Once you’ve found a decent house purchase in Michigan, be sure to follow through with a well-thought-out strategy, remodel the property appropriately, and attract a high-end buyer.