While the U.S. housing market continues its strong growth after the Great Recession, as evident by new home sales, it still has a problem: an aging housing stock.
Approximately 52% of U.S. homes were built before 1980, and almost 40% prior to 1970. Many of these homes are in metropolises such as Washington, D.C., Philadelphia, and Chicago. The median age of a home in our nation’s capital is 75 years. In Philadelphia, approximately 70% of homes were built before 1960, with 40% constructed prior to 1940.
Aging homes tend to be less energy efficient and lack many of the modern conveniences and technologies that come with new construction. These properties are less attractive to younger, first-time homebuyers seeking turnkey-ready homes.
Opportunity Is Knocking
For those looking to get into the fix-and-flip and real estate investment spaces, the aging housing stock offers a huge opportunity. Between permit and zoning requirements and the cost of materials, new construction can be a complicated and pricey endeavor. An older, pre-existing home in need of renovation can have charm in its exterior that many buyers don’t want to lose. Modern homes, while attractive, don’t appeal to everyone, even younger hopeful homeowners.
To the right real estate investor, these aging homes can become dream projects with solid return on profit.
There are a few points and project any flipper or investor will want to consider when tackling an older home:
• Update the kitchen, and add an open-floor plan. Formal dining rooms are not a top priority for younger homebuyers. Use that space to create an open floor plan and larger kitchen, which has become the central gathering area when entertaining.
• Don’t forget the bathrooms. Aside from an updated kitchen, remodeling the bathrooms in your flip will yield maximum returns. Even minor improvements, such as replacing the toilet, sink, tile and paint can have a big impact.
• Include an aesthetic and efficient home office. According to Gallup, 43% of Americans work remotely at least part of the time. These numbers are growing as technology advances and companies adjust their recruitment strategies to find the most qualified employees, so this room will be important to many potential buyers.
• Keep your improvements low maintenance. These buyers are not looking to purchase flipped homes only to make repairs in the future. It may cost more upfront to modernize an old house, but the last thing you want is your buyers reaching out with complaints a year down the road.
• Adapt and equip the house for today’s technology. Landlines are ancient, and younger buyers won’t care if the home does not have phone jacks. More important are capabilities for technologies such as smart home devices, smart plugs and thermostats, keyless locks and video doorbells.
• Remember, a picture says a thousand words. Do not underestimate the importance of taking great photographs of the house once it’s completed and you’re ready to list. New buyers will spend more time sifting through photos online as they search for potential homes, so those photos must be persuasive. Bad photography is akin to bad marketing and advertising.
If you’re serious about flipping, think about older homes in urban markets, as there is a need for updating these properties. The upstart cost may be higher, but there is a market, particularly in younger buyers who are looking for areas that have lots of attractions and are within walking distance of city centers.