I just watched a video on Clark Howard’s Website about real estate flipping “coming back.” As if it had ever gone away. Well maybe in other areas of the country but here in the Triad it’s never stopped. There are always folks who are buying homes, fixing them up and reselling them in the area- there just aren’t as many as there used to be. That being said, something he said in the video bothered me- he hinted at real estate flipping had somehow helped to crash the housing market and that’s not really the case. The housing market crashed for a variety of reasons but one of the main reasons had to do with folks who qualified for a house using a regular mortgage (FHA, VA, Conventional, USDA)whofound out that by going with an Adjustable Rate Mortgage (ARM) they could qualify for twice as much house. And so the bought twice as much house- more than they could really afford. Which of course was a bad idea- I’ve said it before and I will say it again: just because you can afford X amount of house on Paper doesn’t mean you need to spend that much. And then of course the banks slapped these B & C grade mortgages into packages and sold them as A paper to investors and when they started to default, the market started to crash. But that’s a whole other post.
That being said, Clark actually says this in his video- home flippers can be good for you and I agree. Yes they can! As people get back into the market and start buying homes to flip, it’s a good thing. Investors are buying foreclosures & short sales up, fixing them up and reselling them at a higher price. Yes they make money on the sale- what’s wrong with that? The benefit to you as a consumer is that your neighborhood doesn’t have abandoned or foreclosed homes sitting around in disrepair, bringing down the market value of your home. Also when they resell at a higher price it increases the value of the homes sold in the neighborhood so that helps you too. Plus any sale of a home that is NOT a foreclosure or a short sale increases value of the whole neighborhood, so when you go to sell your new comparable for pricing isn’t an REO property but a RESALE. And finally let’s face it- a decrease in the foreclosure and short sale inventory means a decrease in lower valued homes across the board- in every neighborhood, all across the country. Decrease in inventory means as demand increases, so will values and prices.
So these investors who are coming into your neighborhood and buying that ugly or foreclosed home, you should thank them. They’re helping to stabilize the housing market and increase the value of your personal home. And even if they just rent them, at least they’re being maintained and not sitting there deteriorating. Your home’s value is being increased every time a foreclosure or short sale is sold and fixed up. And that’s a good thing!
Clark Howard also says that perhaps you, as an industrious, hardworking person, could do the same thing, but of course he doesn’t tell you how to do it. That’s where I come in. If you have questions about buying homes as investments, either to flip for short term gain or hold and rent for long term gain, I can help you, of course. It’s what I do.
Do you have questions on buying homes as investments? Post them here and I will try to help!
