Sudeira

According to a recent Wall Street Journal article, people are back to flipping homes again.  Which is no surprise to us since we are looking for a homes to work on ourselves.  Prices are cheap, lots of homes are in sub-par condition and if the final price is right, they even sell.

Notice though in that last paragraph I didn’t say we are “flipping houses?”  That is because that phrase has become the pariah of the real estate investment game.  While those of us that do it professionally know what is going on, many end buyers hate us now.  They see us as buying homes they could have had for cheap and making a big profit. 

Flipping isn’t a "job".  They aren’t "professionals". They’re *opportunists* who seek to milk a get-rich-quick scheme.  Most flippers tend to effect purely cosmetic repairs on a house (granite countertops) to make it move fast, while purposefully hiding deeper problems from the unsuspecting buyer.  So, add "scam artist" to the list as well.
Comment from Redfin Forums

While I am sure that may be the case in some situations, I guarantee that a lot of houses also wouldn’t make it into the hands of home owners if rehabbers didn’t work on them first.  The first reason is that we can put up with the bank’s short sale lunacy and pay cash.  Real estate flippers gets deals done and gets homes out of the bank’s hands.  Second is that professional rehabbers put houses back together again.

To be honest, I haven’t looked at a project house yet that was move in ready.  I know some people are flipping homes like that, but it isn’t the norm.  The house just down the street is a good example.  Investors bought it at auction (aka all cash), spruced it up a little bit and then sold it in three weeks, for a profit I would assume. 

BUT, if they hadn’t had ~$300,000 in cash on hand to buy it, that house would have wound up in the hands of the bank and probably still be sitting vacant.  Instead I have a new neighbor that I really need to go say hi to.

So real estate flipping has become a negative term and us real estate investors that do it are not smiled upon as brightly as before.  That is ok, we will keep doing it and making a profit, but if anyone asks I rehab properties, not flip them!

If you would like to know more about how to make money rehabbing properties, contact me today!

Photo courtesy of Andy De Maesschalck

I should know better than to read all the backlogged posts about real estate on a Monday after a holiday.  This one has me irritated.  This blog post is ripping on real estate investors for flipping short sale properties and in the process defrauding the banks.  I have several problems with this.

First is that flipping homes is in no way illegal.  The only time that it is, is when the seller has a buyer for a higher price and doesn’t disclose it.  Of course there are always other ways to make it illegal, but the simple act of buying a home, then selling it for more money is not illegal.

Banks are trying to force buyers to not flip the home they are buying.  Banks are:

banks are requiring everyone involved in a transaction, from the real estate agent to the mortgage broker, to sign affidavits swearing they have aren’t in the flipping business with anyone else involved in the sale.  Source

Of course they are doing this at the same time as they are jacking buyers around, not processing short sales for 6 months or more, and demanding buyers to use them as the lender.  Effectively they are forcing people to buy all cash, and who has the cash?  Investors of course.

Then there is complaints that flipping drives up prices.  How can that be?  Didn’t the new and improved lending rules make that impossible by making the appraiser report to the bank not the borrower?  Oh, and while they are at it, the banks cut the fees to the appraisers who now outsource as much of the work as they can.  Can you say ‘super accurate Zillow based appraisals?’

What about the ‘added value’ issue?  Part of the complaint is that flipping homes doesn’t add any value.  Two thoughts here.  One, is that I have yet to see a house get flipped that didn’t get at least a minimum of cleanup and repackaging done to it.  That is added value.  Second is that by screwing around with buyers like they have, the banks have created a situation where a property is more valuable simply because it is not a short sale or REO! 

Buyers are sick of the games the banks are playing and are paying more for properties that won’t have to have bank approval to sell.  This of course drops the price of bank owned ones even further.  As I see it, simply having the cash and patience to fight with a bank for 6 months to close the sale of a home is added value enough to warrant a flip.

Enough ranting from me on the banks and how they are screwing up the market and blaming it on everyone else.  Now that you know my opinion on this, let me know what yours is.  Are the banks to blame, or are they being hurt by dirty real estate investors that are flipping properties?