From Margaret Everton on January 14, 2010 in San Francisco
Remember when people used to flip houses for a profit? Yeah, that was so two years ago. But something thats happening in the Bay Area right now is not just a high-risk throwback to 2008. Its a real cash cow that is making some very happy home-flippers. If the housing bubble has burst, loans are scarce, and cash flow has all but stopped, how are these investors doing it? Its a new game. The rules have changed. And savvy investors, quick to adapt to the new milieu, are at an advantage. Now, home flipping is not a sport wholly dependent upon an upswing in the real estate industry. Here is why flippers are winning.
Foreclosures are Everywhere
Everywhere you look in the Bay Area, there is a home for sale. Most of those homes are foreclosed, which means el cheapo. The chance for a cash-happy investor to get a low-cost house and sell it (still at a low price) for a pretty profit is high indeed.
Mortgage Rates are at Rock Bottom
With the burst of the bubble has come a nosedive in mortgage rates. No, they wont stay there for very long, but while theyre low, people are buying houses. The trick is working to get money flowing into the real estate industry again, but the trick is also in favor of home flippers. The burgeoning real estate market helps freshly fixed-up homes to sell much faster. In fact, one S.F. house-flipping denizen is getting ready to flip his third home in just over a years time.
Tax Incentives are a Big Boon
By now, most people are aware that the government is allowing first-time homebuyers a fat $8,000 tax credit for buying a home. Last years tax credit program not only continued, but got better. Whats more, any homebuyer (not just first-timers) can get a tax credita cool $6,500. Now that just about anyone is eligible for a hefty tax credit, more people are buying. These are welcome winds for home flippers, who are seeing super-fast turnarounds on their flips.
Winds may change, though. The housing market is like that: changeable. Since there is no guarantee on Uncle Sam keeping up the tax credit, and since lending institutions may hike interest rates again, the flipping may be slowing down. Well just wait and see.