00:00:00 Speaker: All right. Welcome back to the seven Figure Flipping podcast. I'm your host, Adam Whitney, CEO of seven Figure Flipping and Blackjack real Estate. We are on episode three of four in our twenty twenty six Flip Market report series, and we're talking about where to actually buy. So there's a city where the median house cost one hundred and forty two grand and sells in thirty three days. That's wild. There are markets that are also posting triple digit gross flip returns, while places like Phoenix and Austin are barely breaking even. And there are ten markets everybody calls disasters that I think are some of the best hunting grounds in the country. If you change one thing about how you operate now, this is part three, as I said of the Market report series. And today we're going to get tactical if that's cool with you where to actually buy in twenty twenty six. So let's get into it. Okay, the top markets and what they share. Let me start with the markets at the top of our list, because the pattern matters more than the names like don't get emotional about the cities. And trust me, I could because some of them are in Ohio and I'm not an Ohio guy. So first off, Cleveland is number one, the cheapest major metro in the country. In a time when affordability is critical, the median is at one hundred and forty two grand, and days on market is only thirty three days. And rents are so good there, they often are beating the cost of ownership and the p I t I on it. Principal interest, taxes and insurance. So you can buy a house under one hundred and fifty grand and flip it to an FHA buyer, or hold it for double digit cash flow. Like let's go. All right. Now, Pittsburgh, Pennsylvania is the number one for flip ROI, uh, in the country at seventy three percent growth. So the difference between what they buy for and what they sell it for, not inclusive of all the costs and stuff, but like just the gross margin, seventy three percent. Uh, Pennsylvania number one is a state that's pretty wild brick housing stock there. You got deep discounts, stable hospital and university economy there. It doesn't really boom or bust. It's, it's, it's pretty solid. Uh, another place I like is Buffalo, if you think about Buffalo has some of the highest flip ROI in the nation on severe supply scarcity. So we're talking northeast now. Um, great flip ROI, but also a scarce market for inventory, fast days on market, you got good median income, so you have qualified buyers up there and almost no overbuilding risk. Like you don't have a bunch of new builders there. Like that's a killer market right now. All right. Another one that I really, really like is Kansas City on the list. It's the number one home price gainer in the index. It's up eight point six percent, and it's hosting the World Cup matches in twenty twenty six with over a billion dollars in projects that are getting fast tracked, like don't sleep on what's happening. In the current news, the World Cup is bringing money to places in the United States. Now you let's let's hear like, let's listen to what I'm saying. What do all these things have in common? Affordable entry, man, tight supply and affordable entry housing stock that costs less than it would to rebuild it. And real demand, like it's just real demand. That combination is the recipe today in this market. So these markets are going to change over ten years. But the recipe in and of itself, where you have affordability and demand, that's never going to change. Okay, now I want to camp on Kansas City in Columbus, Ohio for a second because they teach you something you can kind of use anywhere. It's what I call the catalyst test. Kansas City has the World Cup coming up and a billion dollars fast tracked in projects, like I said. So if you think about that, that in and of itself is wild. Columbus has Intel building up the Intel's building semiconductors. That plant, it's worth around twenty billion bucks. Like us. It's pulling a bunch of jobs in capital into that market and renters into that metro metro. Now those are what I call catalysts. This is the catalyst test. Those are real fundamental reasons demand is going to grow and have nothing to do with a speculative price run up. Like there's an actual logical, factual, proven reason that you're seeing what you're seeing in that market. And anytime you have like an, a major employer like that moving in, it's bringing people jobs and higher median incomes and infrastructure. It's, it's a massive event, right? So jobs like that's that's insane. We talk about the catalyst jobs and people providing jobs, right? So a catalyst is a reason for demand that you can point to. This is important. That's just like fundamental here. A tailwind on the other hand, like twenty twenty is really just like momentum. It's like, we're not even sure why black swan event like the pandemic and guess what? It runs out. And it for many of us in the market, it didn't feel good. It was painful. So when you're evaluating a market and ask what a catalyst is in that market, if the only answer is prices have been going up, that's really not a catalyst. That's that's more of a tailwind. And you already saw in the episode, uh, in episode two, what happens when tailwinds fade with Florida specifically and in Texas. But if you can point to an Intel plant or a job engine or a billion dollars of public investment, now you have a real kind of fundamental reason to believe don't sleep on AI are fundamentally the the the goal, the the person who controls the gold makes the rules. You've heard that, I'm sure. And AI, it's not the it's not the model. It's not sonnet. It's not fable. It's not that. It's actually the gold is actually the person who owns the compute power and the data centers. So where are those going up? Data centers are physical compute power needs a place to live, just like people need a place to live. So that's a that's a secret that you guys can kind of start looking at and researching where those are going. That's pretty big. Okay, now the fun part, the worst markets in the country. And I'm going to argue some of them might even belong on your target list. So Cape Coral is down nine percent. Austin's near break even on flips. Tampa's down six. Phoenix with a single digit flip return. On paper, they look like places to run away from. But think about what produces a bad market. Okay, we talked about this oversupply. Long days on market thirty plus percent cutting the list. Original list price. Now ask yourself this question what does all of that produce on the seller side? It produces the most motivated sellers in the country. These are not never buy markets, they are change your model and get better at buying markets. So the seller who has had a house sitting for ninety or one hundred and eighty days with two, three, four, five, ten price cuts, is a very different conversation than a seller in a market where everything sells in a weekend. So the opportunity on the buy is enormous in these markets. So you just cannot operate. Um, you just can't continue to operate the way you've been operating or the way you'd operate in Cleveland. They're different markets. And that's an important distinction here, especially when we're talking about a lot of national data. So hey, just because they're on the bottom of the list doesn't mean there's not opportunity. Now, how do I change my model? So what does changing your model actually mean? If I'm in one of those markets and there's an opportunity, but the market's kind of tough. There's three rules for operating in a soft market. Number one by deep the whole edge in these markets is acquisitions. You're buying from motivated sellers at meaningful discounts. If you're chasing deals and paying too much going to be a problem. So just keep that in mind. The discount here is the entire play. Now underwrite a flip with a secondary exit strategy. This is number two for us. Operating in a soft market. You got to have a play beyond the flip, right? You want to have a rent backup if you can. So before you buy, know the rent number. If the resale is slow and you need a property that can cover the debt, like you got to look at some kind of rental play. It could be a long term rental, it could be a mid-term rental, could be a short term rental, some pad split, some rent by the room community. What doesn't really matter because it might just be short term. I might just need to hold on to it till next spring and sell it next spring. But you gotta you have to account for contingencies when you're buying in these softer markets. Now, never count on appreciation. This is number three. You can't bet on appreciation in these markets. If you assume the price does nothing or drifts down while you hold. If your deal that that's probably a safer play. And if your deal only works because you think the market's going to lift you up, you really don't have a good deal in one of these soft markets. You have a little bit of a prayer or a hope, and we call it smoking hopium over here. So don't be doing that. So do those three things by deep underwrite with a secondary exit strategy, like a rent, some kind of rental and never count on appreciation. And the scary market on paper could become a sourcing goldmine for you. So ignore them to a certain degree and you become, uh, you ignore these kind of three things. You're going to become the motivated seller in the market. I can tell you right now in our market in Florida, like we're, we just, um, we're under contract on one right now where the guy is kind of an investor and he bought wrong. So don't be that guy. Okay? National ROI and I said this number a few times, it's kind of useless. So I want to close the episode with kind of the thing I want most you guys to take away from this, like whole report, whole part of the port, the national flip, our ROI return on investment number is kind of useless for making decisions, right? National gross oh oh oh I is around twenty five percent. Cool. Now let's look underneath the hood. Cleveland, Pittsburgh. Buffalo posting crazy gross returns. Phoenix and Austin are flirting with break even. The national average is just kind of one of. It's like those two extremes blended into a number that describes nowhere. All right. Market selection is not part of the strategy in twenty twenty six. It is the strategy like you can't fix a bad market selection with hustle. Like you can't out hustle a market that's like impossible to win. I see this with entrepreneurs all the time. They're smart, they're talented. They got skilled, they're working their tail end off and, uh, but they're working on the wrong problem. So you cannot renovate your way out of a market with no spread. You know, the single highest leverage decision you make is where you choose to operate. And the data in this report kind of hands you the map there. So on the next episode, we bring all this down to the individual deal itself, the exact underwriting math that survives this market, including the insurance mistake that's quietly killing a lot of deals across the Sunbelt. That's part four, and that's going to be the finale. So now if you want to read the full report and you missed any of the episodes so far, you can just click the link in the show notes or description below. And here's what I want to do. Let's take your current market and stack it against the recipe from segment one that I talked about. Affordable entry and tight supply below replacement cost stock like we're seeing in Pennsylvania. This is what I would consider real fundamental good demand. So how many of those four does your market actually have? Like, do you have even just looking at two, do you have an affordable entry like the national median price points for fifty? Like where are you at against that? And then what is supply in your market? So non new houses, four and a half months, new houses almost ten months. Like where do you compare to that? So drop a comment with your market and your flip ROI if you know it. If it's in this report, you can take it from the report. I want to see where everybody's hunting. And if you're on Apple or Spotify, I know I say this every time, but look, this is me just spitting game. Not easy for you. Um, my goal is to impact and change as many lives as possible. So share this with somebody and leave us a five star review so more investors can find the show. And I'll see you on the finale.
