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Government financing gives HUGE profits to investors.

Recently, I have been in contact with investment groups preparing them to buy undervalued properties. Can a fix-n-flip be done in a declining market with no real end in sight?

Absolutely! - Target properties that have any problems that will not allow the home to qualify for FHA or VA financing. Fix the issues in the home and make some aesthetic improvements. Run it as an exclusive listing while the remodel work is getting done. Once fixed, flip the property to an FHA/VA buyer and repeat the process with another home.

Why it works? - The asset managers working for the banks don't care about putting money into homes. Therefore, if a condition will pop up on a government appraisal, the bank won't pay. The buyer walks and the asset manager slashes the price to try to get someone to buy it.

How much profit? - That depends on the quality of the listing agent. If they're new, not much. If they've been around for a while in the REO market? A LARGE AMOUNT! These are the ones to target. There are so many out here that I've told each investor to avoid any property that will not return $15,000-$20,000+.

Sure there are anti-flip policies and other risk factors to consider but since government financing is ruling our kingdom it's making it all worthwhile. I'm helping to bring run down properties up to par with the cleanest homes in that market area. I help get buyers a great deal and pick up others along the way. I'm keeping construction related companies busy with work and turning a profit for an investor.

There's a great deal of opportunity in this market and a number of round trips that can be made. Get out there and make it happen this week!

Posted by Mark Organek - Tempe Gilbert Mesa Chandler REALTOR on 01/18/2009 09:42 AM

Comments (7)

Fix and Flip in the ActiveRain Channel

investment property, fix and flip, arizona properties, investment profit, reo, foreclosure, fha, home values

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7 Comments on Government financing gives HUGE profits to investors.

JAN

Doesn't the FHA 90 day rule on title transfers hurt your profits? What do you do with the home for over 90 days, 120 days or more before you can close them.

David - The spread between a home that can qualify for FHA financing and one that cannot will sometimes run $50,000+ on a $100,000 home. These homes just have minor issues for contractors, major issues for first time homebuyers. Even though we have to wait to sell, that's just more marketing time we have to gather up more buyers for our end product.

Sounds like a good idea I wish you luck.

This is the type of secnario more investors should be thinking about. There are still available finance options for investment properties, especially through private lenders. Since there are many great deals in the Phoenix Metro area, it's time for investors to take advantage of this situation.

Pat - It worked again this afternoon at an open house I did. Three separate investors wanted to start doing rehab and flips.

Steve - It's funny that you say that. Although I originally started out seeking cash investors, some of the projects have enough room for private lending, even at 18%.

JAN

Hey, Mark.

As a former property investor having been involved in 818 of those in 7 states over 33 years, I think a defined amout of $15,000-$20,000 is low. Most of us use a percentage, just like Realtors do with their commissions. We want a minimum 20% return, and preferably at least 33%.

Newbie investors working in the condo market where all that needs to be done is some paint, new carpet, new appliances, etc., could justify a set range like you have, but the work involved in serious renovation and flipping of a house requires more to make the time and trouble worthwhile. Just as in real estate, the larger the house, the more difficult the renovation, and the more difficult the sale, so the higher the commission should be.

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