Pittsburgh-based investor and house flipper John Walker of Turnkey Investment Properties and his business partner, Jim Auten, usually have around 10 flips on the go at any time. When rates were low, and business was booming, that number doubled. However, high rates and low inventory have seen many of their fellow flippers exit the market.
“It’s a case of the last man standing right now,” Walker says.
According to recent Bank of America research, it’s a scenario played out across the country, with sellers staying put for fear of sacrificing a low mortgage interest rate. About 80% of outstanding U.S. mortgages are at interest rates below 5%.
“It’s a needle-in-a-haystack scenario, with the margins thinner than ever,” says Walker. “You’re buying high and attempting to push the comps as far as they will go to eke out a profit. The good news is that generally, if you do a good flip, you’ll find a buyer because there’s so little on the market. Still, you have to be meticulous on the buy and construction sides to make a profit.”
North New Jersey-based flipper Shaheer Williams of Urban Luxury Development is a 30-year real estate veteran. He routinely has several flips going on. And he says the market is currently tighter than he has ever known.
“Right now, my advantage over many newer flippers is my reputation,” says Williams. “The other metrics, such as construction costs and the buy price, don’t allow much room for negotiation, so I’m getting deals because of my track record and personal network.”
Looking to flip houses but concerned about risk? Here are some tips from Walker and Williams for minimizing risk and keeping deals flowing in a tight real estate market.
1. Use Private Money With a Deed-In-Lieu of Foreclosure
Building a long-term relationship with private lenders who get paid once the deal closes rather than demanding monthly payments takes away the stress of coming out of pocket in the…