Real estate observers declare that house flipping, which declined following the financial meltdown in 2008, is rising again, as a result of low interest rates and rising home values.
Flipping comes back as investors propel into resurging market
In 2016, 5.7% of all the home sales were flips, the highest level since 2006, as outlined by Attom Data Solutions.
The pattern is attracting the attention of Wall Street: Last week, Goldman Sachs bought Genesis Capital, a prominent lender to house flippers. The strategy requires immediate access to money from developers that are willing to pay higher interest rates to acquire it. The loans are backed by the property typically run for a year or less.
For the lenders, the loaned funds to flippers offer reliable returns of around 8% from borrowers who must meet minimum investments, generally $100,000. The loans include risks, however, including developers not able to pay them back and a decrease in real estate prices that might make properties challenging to sell as well as rent.
Investors say hard-money loans tend to be more stable than a bank mortgage since they will be secured by properties at a lower loan-to-value ratio, a risk assessment utilized by lenders. Hard-money lenders boast of the swiftness in which they finance loans, typically in under a week, in comparison with a few months for a traditional bank.
For the smaller builders and house flippers who depend on these financing options to do business, the speed with which these lenders can offer the cash ready trumps the high interest rates it will cost.
Ready to find your next flip? Nick & Cindy Davis with RE/MAX Premier Group are here to assist you. We are always a just a click here away or call to 813-300-7116
