15 May Fix and Flip
Where Time is the Key Dimension
Fixing and flipping worthwhile homes is a branch of real estate that calls for more than the skills of marketing and salesmanship. Excellent management discipline and strong knowledge of the skills and value of renovation – even if subcontractors are to do the work – make Fix & Flip a world of its own.
Yet it can be a rewarding world. Very rewarding, in fact. Just a couple of weeks ago the Wall Street Journal pointed out that volume and turnover have reached nearly to the 2006 level, the very peak of the most recent real estate boom. More than 10% of the homes sold in the final quarter of 2018 were fix & flips. Truly a significant landmark, yet the reason the WSJ story points so brightly to this opportunity is that fix & flip is currently almost twice as profitable as it was at the peak of the boom.
That’s going to get attention. But this time a stampede of amateur flippers is not likely to cause a bubble, because access to money has become more disciplined and responsible in today’s marketplace. REI Commercial Capital offers serious investors and operators the access to timely cash that’s called for, to keep the process of refurbishing and selling moving forward. That forward motion is what spells profit, and time is clearly a key factor for success when you fix and flip.
The Three Facets of Time in Fix & Flip
The obvious time dimension in fix & flip is the fact that the longer you own a property, the more you incur carrying costs. Until the payoff, you’re the one carrying the loans, the taxes, the insurance, and so forth. So the faster your work is done, the more profitable this property becomes for you. From our experience in construction and real estate development, the team at REI can point to at least two more factors that make time of the essence in fix & flip.
First, good prospective flip properties get snapped up quicker. There often are competitors vying for the keys to that “worst house in the best neighborhood.” The cash-rich or pre-qualified buyer is going to get them every time, unless you have a ready connection to commercial capital loans. REI stands ready to give you this advantage.
Second, becoming known to subcontractors and the trades as a quick payer give you two significant advantages in a competitive fix & flip market: You get better contractors, and they put you higher on their list of work to accomplish. At REI we know from experience what an edge it can give you to be known as quick-pay.
What Makes a Boom a Trend
As bright as the prospects for fix & flip are nationally, our own region’s outlook is even brighter. The real estate market in the Lowcountry once again outstrips the nation as a whole. Trulia shows the median sales price of a property on Hilton Head Island, for example, growing steeply. The median price of a three-bedroom home is currently up 8.5%, a one-bedroom is up nearly 21%, a two bedroom is up more than 40%, and the median price of a 4-bedroom home is up more than 129%, year-over-year. Though Hilton Head Island is not typical, it is generally a bell-weather for the value of properties on the mainland around here. The Charleston market is much less typical, because of the substantial industrial component of employment there, and also due to the stampeding population influx of recent years. What makes Hilton Head Island stats relevant is that the buying prospects and motivations there are similar throughout the region.
What about those motivations? Rumors of the death of the Baby Boom were greatly exaggerated. Real estate professionals continue to fish fruitfully in the stream of Boomers who are reaching the stage of life where their obligations are less and their freedom is greater. For many, having endured what passes for weather in the North, every day sees more and more deciding to move “where the livin’ is easy.”
Beyond the Boomers
Real Estate prospects among Millennials are much stronger than expected, and they want what a flipper has – a home with a heritage that is nevertheless tailored for their style of life. It’s true that Millennials were slower to enter the housing market. Analysts pointed to this generation’s unusual burden of college-loan debt and post-2008 employment challenges. Yet recent studies have shown that Millennials’ real estate buying behavior has been similar all along to that of the segments of prior generations who chose to move to big cities for knowledge-based jobs. The desirable careers of the Millennial generation were at first located largely in expensive cities, so the wherewithal to buy, rather than rent, took longer to put together.
Now that’s changing. The knowledge-based industries of the 21st century are more and more locating in pleasant climates like ours, because they have found Millennials to be more reluctant to compromise lifestyle for career than their predecessors were. Richard Florida’s landmark book, The Rise of the Creative Class, basically pointed out that the only reason to have a city in the 21st century is if smart people want to live there. As it turned out, many industries chose to meet the Millennials halfway. The result? Millennials today often don’t have to wait for retirement to move to the sun.
The Profitable Implications for Fix & Flip
The moral of the story for enterprises who fix and flip homes is that today represents an historic opportunity, and tomorrow looks mighty good too.
Taking maximum advantage of this opportunity calls for ready access to the money that keeps a project moving, not waiting for the payout of a previous property. For that, you can call on us. REI has the combination of experience in construction and real estate development, and access to a variety of sources of cash from capital financing. Let us be your advocates in the marketplace for money. We know the ropes from both ends.
REI Commercial Capital the preferred source of the money your business demands, to do what you’re in business to do. Just call us at 843-541-2966, or visit http://www.reicommercialcapital.com/ for more information. We look forward to getting acquainted.
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