The Flip is Dead: New Rules of Real Estate Investing
No More Flips? RE Investors are now in Buy-and-Hold Mode
The real estate market is still dominated by distressed properties, and as opportunistic investors, we can’t ignore short sales, foreclosures, and defaulted note buying. One thing seems to be changing though. Whereas the preferred exit strategy used to be flipping a property or note for a quick profit, that strategy no longer works in many cases, due partly to new federal rules such as HAFA and HAMP, restrictions on same-day transactions, seasoning requirements, and general market factors.
Cash(flow) is King Again
However, there are other reasons that vulture investors are looking beyond the quick flip–and that’s because buy-and-hold returns are so good right now. (Read about Tanya the “vulture investor” below and do the numbers yourself.) All of a sudden, investing for cash flow never looked so good. (Robert Kiosaki is smiling and nodding…)
Like everything, the current situation creates new winners and losers. The real winners seem to be well-capitalized investors who can pounce on these distressed properties–either by buying at auction, buying REOs, or by acquiring non-performing notes with the intent of getting access to the underlying assets. (This last strategy, a favorite among hedge funds, is probably the least understood method of picking up distressed real estate, and we’ll go deeper into in a future article.)
The losers may be individual investors who know the local market well but who either don’t have ready investment capital or who can’t let their cash get tied up for months or years in a buy-and-hold scenario. Solutions for these investors may involve teaming up with private investors as “bird-doggers” or partners. Plus, it’s an exaggeration to say that house-flipping is absolutely dead. It’s not. It’s just getting harder and harder, and the returns often aren’t as good as they were in 2008 and 2009.
What do you see happening out there? Are you still able to flip houses profitably? Or is the Flip dead as a viable RE investing strategy? Add your comment to the pile below…