House Flipping Market Drying Up?

Question

Many of you have had a very good run buying distressed properties, homes in need of repair, and successfully rehabbed and resold them to make a profit.  I believe with the recent real estate crash, we have experienced an unprecedented opportunity to "buy low" as the market bottomed, and maximize profits as the market began to turn.

Today, market conditions continue to improve.  The number of foreclosures nationally continues to decline.  Financing has gradually become easier (compared to 2008/2009).  Home prices are increasing.

So my questions for the BP Community....

Is the home flip market drying up? Is this renovate and resell strategy a viable, long term, sustainable method to generate good returns?

I understand there will always be good deals, given ANY market conditions.  A persistent and creative buyer who is willing to do the leg work should always be able to uncover good leads.

I guess I'm looking for opinions from the home flip veterans out there, and any anecdotal evidence you might share from your respective markets.

Thanks in advance for reading!

Dev Horn · Answer

In a general sense, the market is DEFINITELY tight right now - the inventory of distressed properties is very low in most of the major markets.  In many, hedge funds came thru and sucked up an enormous amount of inventory in the past 24-30 months.

I think one thing that has exacerbated the low inventory issue is that all the REI gurus have spun back up and they're churning out tons of new "wholesalers" that are out there fighting the veterans for leads/deals.  Too many novices (& veterans) clamoring for not enough inventory creates a very tight market.

The good news is that most novices don't actually do any marketing - often because they gave all their free cash to a guru.  If you are serious about this business, understand your market/farm area, have a team in place, and DO MARKETING, you can be the guys that are getting the deals while other people discuss how much the market sucks!  =)

Carson M. · Answer

I believe there will always be 1)distressed homes in good markets and 2)motivated sellers that are willing to sell their home (for many reasons) below market price.  I see that most flips try and capitalize on these opportunities.

With the crash, prices were hit so hard that one could easily find homes selling for a discount readily via MLS- something that requires very little work to access.  A realtor or simply realtor.com would suffice for finding deals this way.

I think that now, these discounted deals are not popping up on MLS as much because the "average" home for sale is priced reflecting the upswing of appreciated seen over these past few years.  Deals will always be there, they just wont be as easy to find as the time when you could go on to realtor.com and find multiple deals where the numbers work.  I think in order to find a pipeline of these deals, one needs to turn to marketing and reaching out to sellers that are willing to sell at a discount.

Travis Daggett · Answer

@Jim Luby -

You're correct re: stats on a National level.

However, real estate investing is local. For example, foreclosures in Oregon are up 137% over last year. At the beginning of the year in lane county,there was one property sold per month at the sheriff's sale. Now, there are 8-9 per week.

As a result, I'm acting on this opportunity. How long will it last at this level? I don't know. Foreclosures will always occur, but no one can predict the volume over time.

Tom Bujnowski · Answer

Absolutely agree with Dev.  It's all about the marketing.  The reason there will ALWAYS be deals is that MOST investors won't do ANYTHING to initiate a lead.

Jim Luby · Answer

Good points, @Travis Daggett that all real estate is local, and nobody can absolutely predict future foreclosure volume.  We can anticipate trends, but actual volume is unpredictable.

I did find a thread started by Sean Brennan last year that covered the questions I asked above.  Some good responses here: http://www.biggerpockets.com/forums/12/topics/81962-long-term-viability-of-flipping-and-wholesaling

I guess a follow up question to the above - are the experienced rehabbers doing as many deals this year as they did in 2012, 2011, 2010?  Have they seen their pipeline / deal flow deplete over the past 6-9 months?

House Flipping Market Drying Up?

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