The Phoenix Market is in Turnaround- So... I'm Flipping Properties

I've received a few emails... and even a call or two, asking me what I've been up to lately.

I'm happy to report that, though my blogging output has been sparse, I'm doing very well and staying quite busy through a vastly improved real estate market here in the Phoenix metro area.

Here's the latest:

• The market has "lost" several months of inventory. Last year the market had over 12 months of inventory- now there's just over five months. Whether this is a momentary blip, or the new trend, remains to be seen. However... if the trend holds, we no longer have a "buyer's market". We would be at equilibrium. If the inventory shrinks by a month, we'd actually have a "seller's market" for the first time in 3.5 years.
  

• Homes are selling more quickly and more homes are finding buyers. The "days on market" rate is vastly reduced.

• Multiple offers are back. I wondered when I'd ever see bidding wars again... well- they're here again.

• Fix-n-Flips are possible. I've been involved in quite a few lately.

• Cash Flow properties are much easier to find. It's perhaps the easiest thing to do these days- find low priced homes that can be rented with a significant spread between costs and rental income. The harder part is finding cash flow properties with a great deal of equity... but it can be done. This is our main focus.

• Though homes are selling more quickly and inventory is greatly reduced, prices are still pretty flat. We can not call our current situation a "recovery" until prices begin to rise significantly.

These trends are all good things for the traditional real estate agent- especially one who works with investors.

What has kept me most busy though- is finding homes at the courthouse steps and flipping them. I've been working with a few groups who specialize in finding pre-foreclosure homes and selling them at wholesale prices. Very often, their pricing beats the bank. It's not uncommon to be able to purchase homes at $10k below the lowest bank owned home in the neighborhood.

Most of the properties we find have at least $20k in potential equity... that means they could be re-sold at prices well below the lowest cost home in a subdivision. For instance, we bought one home last Thursday that we're selling for $109k. It could be sold for $149k and would still be the lowest priced home in the neighborhood.

One may ask, why sell for so low? We have found that it's better to turn the properties quickly than to hold on to them... it's a time-value-of-money equation in which one computes the cost of money vs. buying and holding. Plus- we don't rent the properties... we only flip or fix-n-flip.

Most of our clients are looking for rental properties; others want to fix and flip... and a few want a primary residence. We tend to be able to find something to suit each of these needs.

In the past few months, we've been buying at a rate of one home per week... but last week we picked up two. Since such homes are usually bought at auction, we are unable to sell them via FHA. The FHA has imposed a "seasoning" rule- such homes can not be insured through FHA for 91 days. This is informally called the "anti-flipping rule." However, those who have cash, conventional or VA loans can close quickly. It's doubtful that any of the homes would be available for longer than a month- let alone three. Most are in contract within a week.

If you'd like to know more, feel free to contact me.

Chuck Willman - AZvest - 480.292.0600.