Although the Wisconsin housing market outpaced the national average last year, properties prices are forecast to slow over the next 12 months. However, certain Wisconsin regions are projected to outperform the market. If you’re thinking about flipping homes in Wisconsin, be sure to read our guide.
If you're thinking about buying a property in Wisconsin with the intention of flipping it, it is important that you understand the risks.
On the one hand, flipping a property can be a profitable exercise if executed correctly. On the other hand, you can end up losing money if things don't go to plan.
The key thing to recognize is that market forces are often the difference between making a profit or a loss. This can include demand and supply at both a state and national level, as well as other factors such as job growth, interest rates, and inventory levels.
To help you along the way, we've created the Ultimate Guide to Flipping Houses in Wisconsin.
This will include an analysis of the current Wisconsin housing market, what to look out for when assessing whether a property is a good investment, and how to ensure you make a profit when flipping.
2019 Wisconsin Housing Market Analysis
First and foremost, Wisconsin property prices grew higher over the past 12 months in comparison to the national average. With current median house prices at $187,000, this represents a 12-month change of 6.7%. On a national basis, homes averaged growth of 6.6% during the same period.
However, Wisconsin properties are expected to grow by just 2.9% over the next 12-months, which is much lower than the forecasted national average of 4.1%
This in itself should act as a warning sign, as the Wisconsin housing market might not be conducive for flipping, based on the above projections.
While searching for trends on a state-by-state basis is often a good indicator on the health of a particular housing market, it is also worth breaking this down regionally. There is often a disparity in growth levels on a region-by-region basis, so do bear this in mind.
For example, the Green Bay area is currently experiencing excellent growth. Properties grew by 8.3% last year, which beats both the state and national average.
Properties in Milwaukee are performing even better. Not only did median house prices grow by 9.7% in the last 12 months, but properties are forecasted to grow by 5.4% over the course of the next year. This potentially makes both Milwaukee and Green Bay good housing markets for flipping properties.
At the other end of the spectrum, Madison home prices grew by just 4.3% last year, which is well short of state-wide and national averages. Prices are expected to grow by just 2.3% over the next 12 months, illustrating that the Madison housing market is stagnating.
These figures should be a further reminder that if you’re serious about flipping houses in Wisconsin, you need to assess the marketplace on a regional basis, rather than just state-wide. This is something that an experienced real estate agent who knows the Wisconsin housing market well will be able to guide you through.
How to Tell if a Wisconsin Property is a Good Investment
Before you get to the point of purchasing a property with the intention of flipping it, you need to assess how good of an investment it is. One such example of a good investment is to find a cheap property in a strong Wisconsin neighborhood.
Shorewood in Milwaukee has a projected growth of 6.1% over the next 12-months. If you were able to purchase a property at a price below the area's $370,100 median value, then you might be looking at a good investment.
You also need to make some considerations regarding the condition of the house. While you think you might be getting a good deal on the property, any potential profits might get eaten away at if the house requires significant work doing.
On the other hand, some property flippers like to purchase houses that need extensive work done, as they are often able to get a significant discount against its fair-market value.
A further indicator of whether or not the Wisconsin property is a worthy investment is to obtain a comparative market analysis. This will compare the value of your prospective investment against similar properties in the same area.
Unless you are highly experienced as a property flipper in Wisconsin, it is advisable that you seek the services of a local real estate agent. They’ll be able to provide advice on any flipping opportunities that you identify.
How to Turn a Profit When Flipping a Wisconsin House
When assessing a potential flipping opportunity in Wisconsin, you need to ensure that you understand the numbers.
The general consensus is that you should follow the 70% rule when considering a flipping investment.
The rule stipulates that you should never pay more than 70% of the property's after repair value (ARV). In a nutshell, this equates to the estimated market value of the property once necessary repairs and renovations have been made.
Let's take a look at a quick example.
We mentioned that the Green Bay area is currently displaying good signs as a potential flipping market, so we'll go with that.
Let's say that you identify a property in the Green Bay area, which at the moment has a median house value of $141,100. The house in question has an ARV of $150,000, and it needs repairs of $20,000.
$150,000 (ARV) x 70% = $105,000 – $20,000 (repairs) = $85,000
This means that you should not pay more than $85,000 for the property, in-line with the 70% rule. Although the 70% rule is not set in stone, it's a handy calculation to be made aware of to ensure you don’t pay more for the property than it’s worth.
Paying Cash vs. Taking Out a Loan
If you’ve found a Wisconsin property that you believe represents a good flipping opportunity, then you need to decide whether you are going to pay for it in cash outright or obtain financing. Lenders are typically more likely to finance the flipping deal if the home is ready to move-in as is.
Buying a property that requires extensive repairs and renovation is an added risk for the lender, so do bare this in mind. You also need to remember that financing takes time. You might miss a lucrative flipping opportunity if you need to wait for financing to be approved.
If you already own at least one property, you might be able to obtain a home equity line of credit (HELOC). This is where a lender will allow you to borrow an amount proportionate to the amount of equity in your current home.
If you struggle to sell the property, financing could lead to a negative ROI. This is why using a reputable Wisconsin real estate agent is crucial, as they’ll be able to guide you the financial side of flipping.
Ultimately, paying for a property with cash will also give you the opportunity to negotiate a better sale price.
5 Best Areas in Wisconsin for House Flippers in 2019
- Green Bay: The Greenbay area outperformed state and national averages last year, growing at 8.3%. With median property prices of $141,100, houses are almost $46,000 cheaper than the Wisconsin average.
- Milwaukee: Milwaukee grew even faster last year at 9.7%. Not only is the area expected to grow by 5.4% over the next 12-months, but median property prices are super low at just $123,200.
- Janesville-Beloit: According to a report by Realtor.com, Janesville-Beloit was the 12th hottest market in the U.S. last year. With a reasonable median property value of $131,600, there's potentially some noteworthy flipping opportunities.
- Merrill: If you're looking for a cost-effective property to flip, then you might want to check out Merrill. Even though median house prices are just $111,800, property growth outpaced the national average at 7.2% last year.
- Sturtevant: In terms of growth, nothing quite beats Sturtevant. Prices exploded last year with growth of 15.7%. This more than doubles the national average. Next year prices are forecasted to grow by 9.8%. At a median property price of $174,400, Sturtevant is a hot market for flippers.
This further clarifies the point that you should base your Wisconsin flipping strategy on a region-by-region basis, rather than state-wide. In doing so you will be able to identify some noteworthy gems.
Next Steps for Wisconsin House Flippers
Profiting from house flipping in the Wisconsin area is no easy feat. One failed flipping purchase can have serious financial implications further down the line. If you're still at the early stages of your flipping career, then you shoud consider using an experienced real estate agent that knows the Wisconsin housing market well.
They'll be able to guide you through the flipping process, subsequently ensuring that you stand the best chance possible of netting a good deal. Clever can connect you with a top-notch Wisconsin agent that has extensive experience in flipping deals.