Are House Flippers First Time HomeBuyers Last Hope?

first time homebuyersAre real estate investors  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 purchase 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.

 

First Time House Buyers

 

Finding an affordable home for the average family is about to change dramatically, 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 costs related to government, inspections, and taxes.These costs stay relatively the same whether you are building a small or large house. I recently read that most builders will price government costs at 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. As a result, fewer new houses are 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 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.  First time homebuyers typically have a tight budget, so issues could completely deplete their finances.  They cannot afford to buy a home that could potentially have problems.

In the past,first time homebuyers have preferred to buy brand new from the builder to avoid potential problems.   Buying a home from a real estate investor causes the concern that someone is just trying to make a quick buck and did not remodel the way that they should.  This is called, “Slapping Lipstick on a Pig,” which is basically taking a big problem and covering it up with some paint.

 

House Flip the Right Way

 

To overcome the conflicts between first time homebuyers and house flippers, house flippers must provide quality housing. Because many first time homebuyers do not qualify for the new homes being built, purchasing a house flip could be their last hope.

If you are an investor, this is an amazing opportunity.  Providing reasonably priced houses is going to become more  of a demand, because there will primarily be no new inventory. That means it is up to real estate investors and house flippers to fill the market void.

First time homebuyers  are counting on flippers to find deals, raise capital, and renovate houses. Doing this, can turn around neighborhoods and make them nicer because that’s where investors find their inventory. You can choose to participate in the tiny house craze, but most people will not want a tiny house. Most people purchasing a home are looking for 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. I predict this market will expand and become a bigger opportunity regardless of what happens with the real estate market.

I have 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 will eventually fall apart.  But this particular trend will be around for a long time because no new homes are being built in this price range. Current interest rates are also so low, that their is a high demand for single family homes.  That is where real estate investors step in to provide high quality, affordable housing to first time home buyers.

I hope this encourages house flippers and those interested in becoming real estate investors. If you decide to flip houses then do it the right way.  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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