There is flipping and there is rehabbing. My definition of flipping is minimal addition of value for maximum profit. I consider rehabbing to be reconditioning houses that have been neglected and aren’t in liveable/lendable condition (real value added).
I don’t blame flippers for taking advantage of the market conditions. I do agree there is some minimum profit margin that must exist for rehabbers to risk capital. The flipping/rehabbing scale is really a continuum but the difference between the two is what is an “acceptable” return on investment as judged by me, a potential buyer.
I agree with patb that the problem with flipping is it removes cosmetic fixers from the market, depriving people who look for value of houses at an affordable price. For people looking for a move in ready house, not concerned about cost, this is not a problem. In today’s supply constrained market, there are very few cosmetic fixers, if any, for more conservative buyers.
This current flipper’s paradise would not exist without government/bank support and collusion so that is where the frustration for me lies. I can’t believe a property bought for 130k can be resold for 260k 4 months later with minimal improvement. It seems there continues to be a problem of lending standards and appraisal. How can such a markup be justified without value added?
Flipping is a result of cash being king with distressed sales, and the target flip market being almost entirely FHA buyers. Mortgage purchases cannot compete with cash purchases right now. The prices are all over the map at the low end, especially with short sales, so that is where I see the most potential as a buyer.
I’m making a few offers on short sales because I think the banks are incompetent enough at assessing value and mitigating loss that they might let a property go at a significant discount to current market prices. I simply refuse to pay a flipper 80% return for 3 month of work.
In an ideal world banks would be mitigating losses by lending directly to owner occupants instead of slashing prices to flippers/vultures who will then mark up the price to current market value and pocket the difference.
As long as insane profit margins are out there for flippers I assume prices still have room to fall. Then again, I’m an optimist.
I want to pay the prices the flippers are paying but I can’t due to unlevel playing field and preference for cash deals over financed deals.
