The Market for Deals in My Hometown - Analyzed - What do you think?

Question

I just spend the last couple of hours researching the fix and flip market in my hometown, Chelmsord, MA. Here are the results:

Population: 33,802 Total Housing Units: 13,744 Single Family Detached Homes: 9,214 2012 Sales: 313 Median Price: $320,000

Next, I ran a public records search to identify all sales of homes in Chelmsford that sold for $30,000 - $200,000. This includes private sales. I figured under $30,000 were related party transactions and not legit deals. There were a total of 38 sales. Then I reviewed each sale and looked to see if there was a resale for more money or if it was listed on MLS as newly remodeled. I identified 8 fix and flips and two teardowns with new construction. Here are some of the details (the second price listed is either a list price or a re-sale price).

Fix and Flips
1 $166,500 $259,900
2 $141,000 $282,900
3 $131,000 $295,000
4 $172,000 $299,900
5 $199,000 $306,000
6 $165,000 $325,000
7 $144,279 $328,000
8 $190,000 $335,000
Teardowns
9 $198,000 $549,900
10 $192,000 $575,000

So, what conclusions can we draw from this? Well, I would say that 8 deals is a small amount. If you apply a similar ratio per population (8/33,802) you get 0.024%. Now suppose you want to get 15 deals per year and you were able to capture 10% of the market. You would need to focus on a population size of 15/0.00024/.1 or 625,000.

What do you think of this analysis? There are some major assumptions here but I wanted to get a realistic view of how many deals there actually out there. Do you think this could be accurate?

Sean Brennan · Answer

Thanks for the reply Brandon Turner

Yea, I have been researching other towns and there seems to be more activity in some. So that made me feel better :)

I found a much faster way to gauge this as well - Michael Quarles gives a quick trick in this post:

http://www.biggerpockets.com/forums/88/topics/46184-help-from-massachusetts-investors-how-do-i-find-out-which-homes-were-bought-in-cash-?page=1#p234471

Brandon Turner · Answer

Hey Sean Brennan I've never really looked at it quite from that perspective, but it's a cool view. I like to look at how many sales there were total - not necessarily just flips. Then, look at how many are on the market right now. This will tell you the saturation. I also pay attention to average days-on-market, cause that makes a big deal.

But, I think you are correct in that logic. There aren't a ton of low priced homes coming on the market in that area, that would be "flippable" in your price range. Perhaps you can add some surrounding areas?

That said - 15 deals per year is a good chunk. You could start with a few in that area, and once you dominate it, spread outward.

My thoughts anyways. Hope that helps some:)

The Market for Deals in My Hometown - Analyzed - What do you think?

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