NPR Story Says: Flipper Cash Propping Up Housing Market
National Public Radio (NPR) has broadcast a story about Craig Fuhr, a real estate rehabber who is flipping houses successfully in Baltimore MD. Here's a link to the story:
I'm in Illinois, so why do I care about someone in Baltimore? Because Craig made sense.
The point that struck home with me is something that Craig said in his comments beneath the story as he engaged in some spirited dialogue with listeners who had strong opinions about flipping (buying a distressed home, rehabbing and selling for profit) that -- to me -- seemed more fueled by emotion than by knowledge.
Craig said there are three rules to follow if you plan to flip houses. Here's his quote:
1. Buy potential flip houses in places where people actually want live
2. Rehab them to the highest level possible. Provide OVERWHELMING VALUE.
3. Sell them at an AVERAGE asking price. DO NOT TRY TO set new comps - because you WILL FAIL and the house simply will not appraise just because its nice.
He's right. The investors/rehabbers/flippers that we have seen fail break one, two or all of those rules.
Kristina and I have been asked to list flips in Edwardsville, Granite City, Collinsville and other part of our territory that were:
1. ...purchased for too much money on the front end
2. ...located on streets filled with rentals, foreclosures and poorly maintained houses that made the street undesirable
2. ...priced too high for a normal market, let alone for the roller coaster we live with now
Investors or potential investors: I would add one more rule to Craig Fuhr's success formula list. If you're serious about locating properties that have good investment potential before other investors find them, get a Realtor who understands you and your business model. Use that Realtor as your buyer's agent to locate properties that would make good flips or good rentals. Your Realtor will know the market, the comps and the potential upside of your target house. They also will have access to the HUD foreclosures that must be sold using the services of a registered broker and the broker's agents. Find an agent you can be loyal to as a buyer and they will do everything in their power to make sure you get the first crack at the best places with the most potential.
And if you're cheap, that's fine. Keep in mind your buyer's agent's commission -- in our market -- is paid by the seller, whether it's a private owner, a bank or HUD.
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