What is not friendly in today's market is the "flipper" mentality... that being picking up a house for a dime, and doing a fast flip sale. In fact, many investors never realized that FHA has had rules in place for some time now that prohibit the sale of a flipper home with FHA financing before the seller has held title for at least 90 days. That means 90 days from the time the offer is written to purchase.. not twritten to close on the 91st day. Since many homes investors use to flip fall into the FHA buyer category, this could affect the less than savvy investor, not staying abreast of the latest mortgage industry changes.
However there is still a good market for investing in real estate for a portfolio. With the short sales and foreclosures available, picking up distressed homes for remodeling, holding them as rentals for a time - or perhaps selling them on lease/option or land contract sale to troubled buyers - is still viable. *If* one exercises caution and patience, and does not focus on the quick buck turnaround.
One such small investor, Edward Malone out of Jacksonville, FL and his business partner, David McNeil - an area suffering it's fair share of foreclosures and devaluation - has words of wisdom for those interested in taking advantage of the sellers motivation and the low interest rates.
"The guys who really got hurt," said Edward Malone, a small investor who survived the crash, "were the ones who pulled it out to buy cars and clothes." Most of those people lost their shirt -- and perhaps the cars as well -- when the bottom fell out of he market. Those who survived had a stronger cash flow, a better business model and probably a bit of luck. Timing can be crucial Malone, a Navy officer who has been in Jacksonville for six years, fell into the industry when he started buying and selling properties in 2005. After making his first sale, he bought two more houses, one to live in and one to reha , ending up renting the second one.
He was burned once, he said, when he had to drop the asking price of a house that had been sitting for too long -- a property he just now has a buyer about to close on -- but managed to keep the side business ticking along, even during a deployment to I aq. Luck played a bit of a role when the crash came, with Malone having sold or rented out his properties before prices started dropping. He now has five houses in his portfolio, with two on the market, although he's considering trying to rent them out if they don't sell soon. The key to continued success, Malone said, is a good credit score and healthy cash flow.
"It's huge," he said. "For anyone looking at the real estate market, you either have firm credit or money in the bank." Focusing on fixer-uppers Malone helps keep his cash flow healthy by doing much of the remodeling work with business partner David McN il, enabling them to keep the costs low. "You've got to make it look good," McNeil said. "I make it look like somewhere I'd want to live."
Another savvy investor using the trends speedbumps to his advantage is Mark Coon, owner of a HomeVestors franchise.
High-quality rehabs are vital in this real estate economy, agreed Mark Coon, who started buying and selling homes as the housing bubble inflated. "You have to adjust for a changing market," he said. Coon has always focused on fixer-uppers: He began buying often- dilapidated proprieties about six years ago, when he moved to Jacksonville after signing up for a franchise with HomeVestors, the company with the ubiquitous "We Buy Ugly Houses" billboards.
"Adjust for the changing market" are the words to remember. Today, with more listing inventory, buyers can afford to be more picky, are apt to go for the home in the best condition for the money. So utilizing wise business practicies - i.e. remodeling, befitting the home and area, with cost effective labor and materials - still proves to be a slow, steady income. Like any business, it is always a profit and loss plan. And far too many novice investors go overboard in the remodel, and find themselves with the Taj Mahal on the block, unable to recoup their investments.
Because the "ready and able" buyer pool shrank with the tighter lending criteria, Coon has taken to selling his renovated homes to investors who are purchasing them as rentals... a business now booming. It's a simple and predictable format really. Those who cannot buy with today's lending standards still rent. Everyone still needs a roof over their heads.
Coon finds that tho property owners still respond to his "We Buy Ugly Houses" signs and billboards, more and more investors are making the calls today. Coon has found a new niche as the investor's "middle man"... finding and renovating the home, making it rental ready.
Perhaps his most sage advise is to warn those in for the quick buck.
Other investors got burned, he said, because they were so focused on the quick cash, they forgot they were running a business. "There's a lot of people who got into this business without a lot of business acumen," he said. "It's so easy to get into the real estate business, and it sounds great, but like any other business, it's tough."
Tough, yes. Ever changing, yes. But when you stay atop of the trends, most often proves lucrative.
_______________________________________________
Also see my "Sellers Beware" post above! Not all independent investors are honest businessment, and the scam business is operating in prime time right now!
No comments:
Post a Comment