Though Melissa is in California, her point rings true here in the Maryland area as well. I always advise investor clients to speak with a good loan officer to see what potential pitfalls they might encounter. The other problem you see in "Flip" homes is poor quality work. If you are going to 'flip" it, do it right. Potential buyers will notice shoddy workmanship and it will come out in the home inspection as well.
What Is an Investor Flip?
An investor flip (also called a flip) is a home or property purchased with the intent of the buyer to make profit, generally by making changes to the property and reselling it as soon as possible.
When the recession hit around 2008 and many homes were in foreclosure or foreclosed, investor flips were en vogue. That’s because home prices were very low. Investors, particularly cash buyers, were able to take advantage of the high property inventory and the low prices in order to purchase properties for below market value, make some changes, and then resell the same property (with upgrades) for an almost immediate profit.
Investor flips are still popular, but there are often times when investor flips don’t close. That is, the investor purchases the property, fixes it in just a few quick weeks, and then faces challenges in selling the property to a buyer obtaining a loan—especially if the investor has owned the property for less than 90 days. There are certain rules with respect to valuation on some loans that may not permit the buyer to purchase the home if it has been owned by the previous buyer for less than 90 days.
Some Statistics on Investor Flips
According to Data Quick, home flipping is still alive and well throughout five counties in Southern California. Across the region, the ratio of homes flipped compared to total sales has already surpassed pre-recession levels. The percentage of homes flipped was 7% in February, and 5.6% in June. The number of Southern California home flips declined slightly in June to 1,194. It is interesting to note that the number of investor flips has hovered above 1,000 for the last 11 months, compared with fewer than 200 during low points of the recession.
In May of 2013, investors flipped 1,377 homes: a level not seen since the height of the housing boom, when investors turned over 1,394 homes in June 2005. Investors in Los Angeles County flipped 419 homes in June, about 150 fewer than the peak. Orange County investors flipped 133 homes in June, down about 60 from the peak in that county. San Diego County investors recently broke housing-boom records, flipping 301 houses in May.
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