As home prices remain high and the availability of foreclosed properties remains low, some investors are finding it difficult to profit from house flipping.
With this new reality, investors are turning to financing to flip their homes, according to ATTOM Data Solutions. The dollar volume of financed flip purchases jumped 31 percent annually, from $6.4 to $8.4 billion. This is the highest volume since 2006.
Many lenders are eager to partner with investors, as well, given how low interest rates have gone and the stability of the real estate market.
As profit margins decline on home flips, investors are turning to lending, and in particular, community banking. Some investors may use rental income or left-over profits from previous home flips, to land their next deal.
In some cases, they are finding it more difficult to work with bigger lenders and are turning to community entities, who will work more closely with them on aspects such as income verification.
Lending restrictions are still tighter compared to more than a decade ago during the boom. About 41 percent of flipped properties were bought using mortgages or private lending, compared to about 68 percent in 2005, according to CNBC. Additionally, lending has loosened up a bit and borrowing gives some leverage to investors to do more dealing.
Investors should also keep in mind that Fannie Mae, Freddie Mac and FHA do back loans, in limited numbers.
As the real estate market continues to do well, the risk from the lender’s perspective is seen as low, and thus more investors are finding opportunities to find new methods to make the most out of their investments.
At Element Mortgage, we can help individuals in the greater Roseville area with their investment plans. The Roseville area remains one of Northern California’s most desirable locales. Strong prices and incredible neighborhoods are just two of the draws. Roseville’s location and price point are two factors investors can greatly benefit from, despite the overall unfavorable house-flipping climate.
If you have any questions about getting a loan as an investor, contact us today.
*American Pacific Mortgage Corporation is not a financial service company or licensed tax advisors; the material provided is for informational and educational purposes only and should not be construed as investment, tax and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is without errors. We are not financial or tax advisors, please contact your financial professional for your personal financial situation.