Are House Flippers First Time HomeBuyers Last Hope?

first time homebuyersAre real estate investors like you and me that flip houses the last hope for First Time Homebuyers who want to buy quality, affordable housing? In this important message, you’ll discover why the inventory levels of starter homes are at all time lows and who can help save the day (and profit tremendously as a result too)!

House Flipping

House flippers are real estate investors that purchases houses in order to fix them up and resell.  These people might be the last hope for anyone looking to buy a home at an affordable price. In this blog, I will share some fascinating information that affects both first time homebuyers and real estate investors. There has been a market trend occurring over the past several years that could alter the course of the housing market forever, and affect homebuyers and house flippers alike.

 

 

First Time House Buyers

Finding an affordable home for the average family is about to change dramatically in America, primarily because, builders are being priced out of the market. When a builder builds a home there are a lot of costs that go into it, like; materials, labor, the cost of land, and government expenses, and these costs have gone up significantly.

Government costs includes all things related to government costs, inspections, and taxes.These costs stay relatively the same whether you are building a small or large house. I recently read a statistic that said most builders will price government costs at about 20% of the overall cost of building a home.  If the government costs are the same for every house, a home builder is going to want to build a higher priced home, because with costs going up, the only way to increase profit, is to increase sales price by selling to a different audience. This means that builders are pricing their homes out of the first time homebuyer market which results in fewer and fewer new houses being built in a first time buyer price range. This trend has caused a huge drop in affordable housing inventory over the years.

 

Overcoming a Negative Stigma

Thankfully, real estate flippers have come to the rescue. This is a very fascinating concept because for as long as I can remember, there has always been a stigma against real estate investors providing housing for first time homebuyers, because first time homebuyers typically have a very tight budget. This means that they cannot afford to buy a home that could potentially have problems, because any little issue could completely deplete their finances. In the past,first time homebuyers have actually preferred to buy brand new from the builder because they know that they are getting a home that does not need work and has warranties. Meanwhile, buying a home from a real estate investor causes the concern that someone is just trying to make a quick buck and did not fully remodel the way that they should.  There is actually a phrase for it called, “Slapping Lipstick on a Pig,” which is basically taking a big problem and covering it up with some paint.

To overcome the conflicts of the past between first time homebuyers  and house flippers, the house flippers need to make sure they are renovating well and providing quality housing. Purchasing a house flip might be a first time homebuyers last hope because they cannot qualify for or afford the new homes being built, and there’s less and less inventory available in their price range.

If you are an investor, this is an amazing opportunity, not just now when the market is booming, but for a long time to come. Providing reasonably priced houses is going to become more and more of a demand, because there will primarily be no new inventory. Your local area might be slightly different,but for the most part,new homes being built are not in the lower price points. That means it is up to real estate investors and house flippers to fill the market void.

A first time homebuyer is now counting on people like us to find deals, raise capital, and get houses renovated. Doing this, can turn around neighborhoods and make them nicer because that’s where investors find their inventory. You can also choose to participate in the tiny house craze, but that is probably not something the majority of people will want to dive into. Most people that want to buy a home, want to do it because they want to get married, or start a family, and need more room, not less.

 

Current Market for House Flipping

Right now is a time of tremendous opportunity for real estate investors to provide quality housing for first time homebuyers, and I predict this market will expand and become even more of an opportunity in the years to come, regardless of what happens with the real estate market.

I recently put together a video called , “Now is the Best Time to be Flipping Houses in the Past 40 years”. This can be a terrifying concept for people who are afraid that good things eventually stop being good and fall apart.  But in this particular trend, because no new homes are being built in this lowest level price point, it will be around for a very long time.The fact that current interest rates are so low, theres not a lot of inventory available for those looking to purchase an affordable home also helps. . That is where real estate investors step in to provide high quality, affordable housing to first time home buyers.

So I hope this encourages house flippers and those interested in becoming a real estate investor. I want you to be inspired, but to also make the mandate, that if you are going to be flipping houses,  do it right. Do not cut corners or slap lipstick on a pig,but instead, provide high quality renovations. Help clear the stigma against house flippers, by providing high quality houses to the marketplace for first time homebuyers.

 

Comments

  1. Samuel Grosshtern says:

    I love your videos, very helpful great tips.

  2. Richard Hoss says:

    Phil,
    Love your videos, I am a remodeler and agree with you on everything especially the building with integrity. I wanted to suggest maybe getting with home warranty companies to offer affordable warranty packages to buyers to handle any unforseen issues and help owners feel a little more comfortable with a reno. Just a thought that I am looking into myself to help get rid of that stigma. Keep up the great work and have enjoyed your videos for 2 yrs now.

    • Phil Pustejovsky says:

      Every Home Warranty company I have ever dealt with is like every insurance company I have ever dealt with…they love collecting payments but HATE paying out claims. I had a situation with a bank owned property I was buying whereby there was $2,000 in closing costs I had to eat up on something prior to closing or the selling bank would get it back, and so I poured it into a 2 year home warranty. Sure enough, the garbage disposal below the sink crapped out about a year after owning so I filed a claim. What a nightmare! And everyone else I have ever asked has echoed the same thing…home warranty companies are awful to deal with. Builders offer better warranties, especially if they are early in a development, because their foreman and building crews are on site and if you have an issue, they can stop by and fix the problem right, and quickly.

  3. Patrick Harrington says:

    What about the home repair warranties offered on resale homes? I have had good experiences with them personally but as you point out…….like any “insurance” scenario, there is always some push back at some point on something.
    Thanks and good material on this video. There is some new home starter inventory in Houston but it is far out in the burbs. A close in flip makes perfect sense.

  4. Laszlo Szekeres says:

    Yes, I agree this idea. This is not only an idea, it is the life here and now. Thank you for this valuable teaching of you Phil. I am interesting in this: which way can I buy my first home under the name of an LLC or other organization, and I rent it from myself? Is there a way to use this advantage concerning less TAX paying 100% legal?

    • Phil Pustejovsky says:

      Why not just buy the house and live in it for two years and then resell? The profits will be tax free. Meanwhile, the interest will be tax deductible.

  5. Gilbert Eatmon says:

    I want to make some big money

  6. Jason hock says:

    Do you have any advice for a home buyer who is having a hard time finding a house. In a market that has low inventory and high prices? Also the video was a grateful help.

  7. Excellent video Mr. Phil as always you gave good information & so much knowledge about real estate.

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