Flipping Has Returned
November 5, 2009
Remember when the real estate market was going crazy. Folks were buying houses and sometimes within a six month period they were reselling - and making a profit. Then the marked tanked and rather than increases in prices, there were decreases in prices. Flippers who entered the market late in the cycle were put in the position of actually using the property as an investment and renting it or, letting the lender take it back through foreclosure.
In the present real estate market, with prices still pretty volatile and mostly on the downward trend, it would seem that "flipping" a property to make a profit would be out of the question. Not so. Both FHA and Conventional lenders have stepped in to regulate the "flipped" property. For 90 days after a property is purchased by an investor, FHA will not make a loan on that property. Just this week it was announced that conventional lenders will not loan on flipped property unless the borrower puts at least 20% down.
How did the current flipping scene come about? Investors with cash available go to the court house steps and at the foreclosure auction bid on the property. No longer are there no bidders, there are many gathering to here the trustee's representative announce the auction. Lenders have the first bid, but it seems that they are reducing the amount of that first bid to a level that attracts investors looking to flip. It was once the case that the first bid by the lender was the amount that was owed plus the costs of sale. From what I hear that is no longer the case and properties may sometimes sell for much less. Investors are also going to lenders and purchasing a block of properties which they then repair and put on the market.
While flipping is a strategy to make money, the properties that I have researched that are flips seem to indicate that the investors wants a quick return and therefore resells at a relative slim margin of profit.
Even in the worst of times, folks can be entrepreneurial, but is still takes a reserve of available cash.
Remember when the real estate market was going crazy. Folks were buying houses and sometimes within a six month period they were reselling - and making a profit. Then the marked tanked and rather than increases in prices, there were decreases in prices. Flippers who entered the market late in the cycle were put in the position of actually using the property as an investment and renting it or, letting the lender take it back through foreclosure.
In the present real estate market, with prices still pretty volatile and mostly on the downward trend, it would seem that "flipping" a property to make a profit would be out of the question. Not so. Both FHA and Conventional lenders have stepped in to regulate the "flipped" property. For 90 days after a property is purchased by an investor, FHA will not make a loan on that property. Just this week it was announced that conventional lenders will not loan on flipped property unless the borrower puts at least 20% down.
How did the current flipping scene come about? Investors with cash available go to the court house steps and at the foreclosure auction bid on the property. No longer are there no bidders, there are many gathering to here the trustee's representative announce the auction. Lenders have the first bid, but it seems that they are reducing the amount of that first bid to a level that attracts investors looking to flip. It was once the case that the first bid by the lender was the amount that was owed plus the costs of sale. From what I hear that is no longer the case and properties may sometimes sell for much less. Investors are also going to lenders and purchasing a block of properties which they then repair and put on the market.
While flipping is a strategy to make money, the properties that I have researched that are flips seem to indicate that the investors wants a quick return and therefore resells at a relative slim margin of profit.
Even in the worst of times, folks can be entrepreneurial, but is still takes a reserve of available cash.
posted by shirley harry at 9:00 AM
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