Is Flipping Business Dead in Phoenix?

Question

Hi,

I have flipped or bought & held couple of houses in Phoenix last few years. I was hesitant to dive in to the business and I waited for all the stars to be aligned. Now that I am ready to dive back in to flipping business, I see no deals out there. I have been looking with my real estate agent / business partner for a while, but I don't see any lucrative deals in our price range. Is the flipping business dead in Phoenix now? Did the price range go up a lot for the same kind of deals? Is only way to find lucrative deals now to get into "we buy houses" marketing business?

To be more specific:

Our price range is below $150K for 2+1 single family in relatively nicer parts of Phoenix metro area (Chandler, Tempe, West Mesa, etc.) with a potential after repair value of $200K

We have seen lots of deals like that previously and actually flipped one in Chandler. However they seem to be gone now.

Thank you in advance for responses.

Albert Hasson · Answer

Serdar, I too have flipped 5 or 6 houses in the past few years and agree that the flipping days are done here in Phoenix at least in the price range and areas that you and I have been targeting.  You may still find some opportunities but the margins are going to be slim and in my opinion not worth the time and effort.

David, I don't quite understand your statement that phoenix is "controlled by the hedge funds and banks", that is simply not true.

First, daily notices of trustee sales are back down to 2001 levels here in Maricopa county.  Currently about 58 new notices daily compared to 498 daily at the peak of the crisis.  Secondly, hedge funds are minor players in this market.  Blackstone, by far the largest fund in Phoenix, owns 0.46% of the houses in the county and controls just 2% of the rentals.  The vast, vast majority (95%+) of rentals here are owned by mom and pop investors like you and me.

Personally, I think the flip opportunities of the past few years were a generational event not to be seen again for a long time.

Account Closed · Answer

Serdar,

Theses are not listed on MLS yet. You can find them through me.

Joe Gore

Brad Chandler · Answer

The flipping business is not dead and will never be dead in any US city. You may not be able to find deals on MLS but they are out there. People will always have a need to sell a home to an investor, no matter what location or state of the economy.

David T. · Answer

@Albert Hasson When I say "controlled by the banks and hedge funds" what I mean is that the banks and hedge funds work together and the hedge funds are paying points over comps for properties in the market, especially at the foreclosure auctions. That has been heating up the Phoenix and many other markets for well over a year now.

Between that and retail buyers chasing deals means that there's little or no room for anyone else, especially someone wanting to make a few bucks out of a rehab. try and apply the 30% rule to the phoenix market and see what you get?

Sure you will find deals from motivated sellers, but at what cost? Everybody is out there looking for the same thing and Phoenix seems to be as hot as a local market gets right now. There may be other ways of making money, but rehabs are definitely at the short end of the market right now.

Good luck with your efforts!

Sean Kremer · Answer

I might also add, lose the realtor for now and hit the streets, looking for run downers, get some i buy houses ads in the papers, send letters out to people in the starting stages of foreclosure, etc......the deals are still there for an investor that will go the extra mile and do the things the others won't do. Its not easy or fast, but it is effective. Get to people any way you can before anyone else does.  Good Luck

Sean K

Dev Horn · Answer

The people that actually do business in Phoenix will be the first to agree with you and Albert that it IS a tough market right now.

Yes, there will always be motivated sellers with distressed properties, but the inventory of distressed properties is lower in most major markets.

From CNBC Sept 3 ~

Home prices are also trending higher in part due to the fact that there are fewer distressed properties for sale. Excluding distressed sales, prices were up 11.4 percent year over year. Distressed properties have seen big price jumps in the past year, as investors fight to get the remaining bargains.

Markets hit hardest by the housing crash have seen some of the biggest price gains: Nevada home prices were up 27 percent annually in July, California up 23 percent and Arizona up 17 percent. Completed foreclosures nationally were down 25 percent in July from a year ago, according to CoreLogic.

So, yes there are deals out there, but the competition for those deals is higher.  If you aren't marketing aggressively with a memorable brand, no one is going to know you are actively buying in that market.  Our Maricopa licensee is dropping 20K+ pieces of direct mail in that market every month...

Account Closed · Answer

The banks have a lot of foreclosure SFR in the Mesa and Phoenix area for sale to cash buyers.

Joe Gore

Kevin Brown · Answer

@Serdar Tuncali

Im in the same boat as you with regards to marketing to a price range. I spend the time to create lists that don't include houses out of my price range. Usually using the tax rolls, as a general guide.

Account Closed · Answer

Brad,

Did not understand your question.

Joe Gore

Is Flipping Business Dead in Phoenix?

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