How’s The Market?
Part 3 – Investing In Real Estate
Investors have largely vacated the market of late as the increase in values of homes and the slowing of appreciation in the area reached a point where it was no longer a pathway to quick profits. (or at least reassurance that loss isn’t eminent)
That said, there are still areas of the region where purchasing and flipping are still going on. Recently, I came upon several homes in the North Highlands, Citrus Heights and the older areas of Roseville where homes were acquired, rehabbed then flipped within a few months.
Generally, these investors have a construction team and are ready to turn these homes from dogs to sales or rentals in a very short span of time. Having a team in place is certainly convenient but not necessary if you know a few people in the trades.
Is There Still Money In Flipping Homes?
In my opinion, yes there is still money in flipping homes but investors have to be more careful now that appreciation growth has slowed. If an investor is looking to flip the home, meaning acquire, rehab and sell, the margins will be tighter right now than the last two years however, if the investor intends on holding the home and renting, it’s a great time to buy IF the home covers the ownership expense.
I don’t believe in overleveraging the investment and waiting for appreciation in home values to make up the difference in monthly loses. I’ve seen this too many times backfire when the market turns and the investor loses everything. In my opinion, although this is sold over and over again in late night infomercials, it’s a dangerous game to play.
What’s The Future Hold?
No one can say what the future holds however, the history of real estate cycles is consistent in that after a downturn like we had, the next one is far enough off for time to be on the investors side. WHEN the market turns down again, and it will, the longer you’ve had your investment, the better position the investor will be in to weather the paper loses in appreciation.
This article I read today by HousingWire.com is representative of my views over the next few years in our region. If the scenarios in this article come to pass, and historically its completely feasible, then investing in real estate to buy and hold is still sound. That said, as appreciation growth slows, unless you get a screaming deal on a home, flipping could become very risky in the short term. (which is what flipping is..short term speculation)
Have questions? Please don’t hesitate to ask.
Thanks for visiting!
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