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Of course. All markets, ALL MARKETS, go through boom and bust cycles....We're busting, but we'll boom again...
I don't think we will boom again like last time.
Flipping was always stupid. If you make a good buy, and are credit/cashflow strong, rent it for over a year, you drop from short term capital gains tax, to long term capital gains tax, a not insignificant change in taxes paid.
Rent it for a few years, then sell and 1030 exchange into other properties; delays taxes until you sell the new properties.
I repeat: flipping was never really the best way to make money.
No, not after President Obama raises the capital gains tax to 28% from the current 15%. And a lot of these flippers had shady finances and would unlikely qualify for a mortgage in today's market.
And personally, I hope flippers don't return. From what I see in my area, the only active flippers today are those who are in the over one million price range. In Manhattan, there are flippers at the Plaza Hotel and a few other high end buildings. One flipper put his condo on the market for $90 million after only purchaisng it for $21 million. In the future, flipping will be only for the rich, not "Joe Sixpack."
I believe that the "flipping market" will return to what it was before the boom. It was for qualified contractors that knew how to rehab a home...(not to just throw a coat of paint up on the wall). Flipping won't be for the faint of heart.
Azrob has the best advice for any "long term" real estate investor. The main benefit of renting is principal reduction. You are using someone elses money to finance a house purchase, and if you can agressively pay off the mortgage, you can make the investment even better.
Thanks for your interesting comments. I've been thinking about buying foreclosed homes at the courthouse auction, repairing them and then returning them to the market as a regular sale. Seems very risky considering that you have to buy the house cash, pay all of the liens, and possibly evict a tenant. I wonder if it would be okay to buy at the auction and allow the tenant to remain in the house as a renter?
In regards to the tax liens, you can hire a title company to do a search for you on these. It shouldn't be too expensive, and some will even give you a discount if you've used them in the past in purchasing title insurance.
It is possible to do let the ex-homeowner stay, and let them become a tenant, but remember that buying the home doesn't automatically turn them into a "tenant". They have some squatters rights and all, but make sure to push a lease quickly, as it is much easier to evict when a lease is in place.
When prices are steady and you can buy foreclsoures for 30% to 50% below market value, then flipping starts to make sense again. You have to make sure you have the right tools. use the web and market yourself. Don't get caught holding empty property.
If you are buying at a price, that IS the market value, you're not buying below market value...
flipping will always be part of the industry. I agree with Jim that you will see more from qualified contractors who are doing major improvements to degraded property.
I don't look at flipping as an investment strategy. I look at it more as an income, therefore all my flipping goes through an S-corp to protect my personal investments from "dealer" status. I pay my income tax on my flips, because I don't want to hold the properties.
yes. it will return. the people who will make money are going to be the high risk takers in the beginning. they'll be the ones that "feel" the market changes coming. they buy, fix, flip... CASH. once they start really raking it in, everyone jumps on the bandwagon and down the market goes again. we never learn. think of it like tipping the scales. that's my opinion.
if you're into it, there's a book that i hear is good, but it would be an example of something that was mistimed. by the time it was printed, the market was starting to turn. Six month's earlier and it would have been a best seller. (FLIP) http://millionairesystems.com/msys/index.html
Flipping will return. For some, it never left. One of my clients is holding onto three of his flips because no one wants to buy them! This is one reason why he's not working right now...he has to turn some inventory.
BTW, "FLIP" is outstanding! Even if you invest - buy and hold - this book will teach you how to acquire, then remodel a property to sell, or even rent.
"Flipping" property will never go away.
People are still buying bank owned or repossessed homes in this area.
It is just the style of the "flipping" has changed.
At this time, you just can't fix a home up and expect to sell it right away.
Hold on to it for a little while and gain some equity when the housing market rebounds.
Lender rating
Sorry, but I disagree. It all depends on what type of loan the investor gets. There are company's out there that want you to flip. In fact, give you 100% of the purchase price, AND 100% of your rehab price. Sounds too good to be true, but it's not...it's real. You just need to be working with a lender that specializes in rehabs and knows what he's doing. I have been doing these for years, the programs are still there, and I lend in most states.
yep, go buya a home with a 100% financing, and watch the value fall while you work on it! great business plan!!!!
Exactly Rob. What amazes me is we are in the middle of long correction, then still followed by a stagnated market, and 'then' normal appreciation...and people are salivating over flipping homes like we are still in 2004. I guess the Rob Kiyosakis, Russ Whitneys andTom Vus of the world are like cucarachas. They never die in any market!
Don't forget about the Casey Serins...
Lender rating
Obviously Rob and BubbleBrain you haven't done many rehab loans. It's not a true 100% of the value. The ARV (After Rehab Value) has to be 70% LTV or less. So, it's an amazing way to invest in property, leaving cash flow for the investor, as long as the the numbers line up. Obviously, a legitimate Loan Originator should never put his client in a position for failure. It's all a matter of experience in doing these types of loans.
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BubbleBrain, investors should be "salivating like we are still in 2004". This is a once in a lifetime opportunity for investors to buy. The market for these type of purchases has never been better.
chicago dumb a$$, the bottom is nowhere near. Prices in most metros are dropping at the fastest pace ever, so buying now is paying too much...
I don't need your stupid "rehab" 121% financing, I have cash. Thats what happens to investors who know what they are doing, and not flipping soon to be broke idiots, we end up with piles of cash. I'll offer cash on homes, fix them with cash, and then refinance after the fact if I choose to. the cash offer will get a lower price from the right REO seller anywas, yet another advantage.
If you need to borrow 100% on an investment deal, your not an investor you are a soon to be bankrupt dreamer.
Lender rating
Rob, I'm not going to argue and I ask that you please not use implied profanity. If that is what's working for you, great. There are some out there though, that wish to have a different strategy. One may not necessarily be better than the other, it all depends on the investor's situation. As an fyi, the product I have been describing is actually a 70% financing, not 121%. I'm simply here to help people with their financing, and help strategize what's best for each person based on their own unique situation. Again, if you have a strategy that works for you, that's awesome, I hope you're making a ton of money. The strategy I discussed above is for a certain type of rehabber that has found a home that meets certain criteria. This made a lot of investors a lot of money.
''This made a lot of investors a lot of money. '
During the bubble EINSTEIN.
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No, within the last 8 months. Please remember, not all markets are the same. It all depends on the deal found and if the numbers work.
Also, just as an fyi, some lenders have taken some Chicago suburbs off the "declining market" category. Times will get better everywhere eventually, history has a way of repeating itself.
If history repeats itself than we a rein for a U shaped recovery not a V! Keep pimping the get rich quick loans.
Lender rating
No such thing as a get rich quick loan.
My associate is flipping a home he bought at auction for $270k, selling for $339k....Currently under contract, will post when transaction closes. He's expecting a 25k return....
I don't think anyone here is naive enough to say that it is impossible. I think that we all agree that the ones doing it now, and who will be doing it for a while, are the ones who are qualified to do, and ACTUALLY know the business. But I can say, with extreme confidence, that it will not return to bubble years flipping activity. But that is a good thing.
I agree with JimSulli 100%! It's definitely a GOOD thing that flipping activity will not resume to pre-bubble levels. On the other hand, I have learned that real estate is local and people will still be flipping but because that unique deal has unique stipulations. There is no cookie-cutter deal.
=l
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Will "Flipping" ever return?
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Do you think that flipping homes will resume again? What will make that appealing again?
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