Those who have jumped into real estate investing in the last 6 years have been spoilt with endless foreclosures and other distressed properties for flipping houses. What happens as the massive glut of foreclosures dissipates, will these same strategies really work?
Flipping houses has been incredibly profitable for investors over the last few years. Outrageous discounts and extremely motivated sellers have provided investors virtually unlimited access to endless real estate deals. In fact there are more viable deals available right now than any investor can handle. By improving on their real estate education and building better businesses and systems investors can certainly do a higher volume of deals than ever done before.
However, some markets across the country are already seeing a shortage in inventory. In fact a handful of markets are not just back on track they have even less inventory than we would expect to see in a normal market, while reasonably priced homes continue to fly off the shelves as fast as they are listed. So what happens when the majority of foreclosures have been worked through, when the competition for the few foreclosures that do come on the market is incredibly fierce, when banks sell the rest of their REOs in bulk packages and homeowners decide it makes more sense to stay and fight to stay in their homes than to sell? For a start home prices will stabilize and rise but the question is will flipping houses will work?
New investors who weren’t in the business during the recent bubble years should know that this is when flipping houses really exploded, in a good way. People weren’t being foreclosed on like crazy and there certainly weren’t the endless array of discounted homes as there are today, not to mention mortgage rates were double or triple what they are being advertised at today.
Remember there are two major components to flipping houses for big profits, inventory and buyers. In an up market with fewer foreclosures to weigh down home prices there are certainly more willing buyers. As things get better confidence will grow and lenders will loosen up slightly as well, creating more able buyers.
This enabled investors to consistently buy and flip homes for tens of thousands of dollars more within just days of buying homes, even out of the MLS. Just don’t make the same mistakes which crippled many investors in the last boom. Don’t get stuck with them and don’t overload on debt and fall into the ‘I only need cash flow’ trap. Instead build on your real estate education now and embrace advanced investment model.